House of Lords
Housing: New Housebuilding
Lord Bates
To ask Her Majesty’s Government what assessment they have made of the effectiveness of measures introduced to stimulate new housebuilding.
The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Hanham)
The Government monitor the rate of housebuilding very closely. For example, we completed 58,000 affordable homes in 2011-12, a third more than the average delivery of affordable homes in 10 years. We are investing more than £8 billion of public funding to support housing, including £4.5 billion investment in new affordable homes, and we remain on track to deliver 170,000 in this spending review period.
Lord Bates
I am grateful to my noble friend for that very encouraging Answer. When added to the tremendous boost to home ownership that the Chancellor announced in the Budget today, it will be widely welcomed. However, does she share my concern that recent research has shown that the average age of a first-time buyer in the United Kingdom is now 35 compared with 28 10 years ago and 24 in the 1960s? Does she agree that there are immense social as well as economic benefits to home ownership? Will she ensure that there is no let-up in extending home ownership to all people, particularly the young?
Baroness Hanham
My Lords, I congratulate my noble friend on managing to put down this Question on the day when there have been such helpful announcements in the Budget about home ownership. I agree with what he said about the difficulty for younger buyers in the market. I also agree that the aspiration of home ownership is extremely high and that is why I am particularly delighted that the Chancellor announced the £3.5 billion housing package, which includes an equity mortgage scheme, Help to Buy, as well as important changes to the right-to-buy scheme, all of which will help not only those mentioned by my noble friend but others in general.
Lord Bichard
In the light of the Select Committee report Ready for Ageing published last week, does the Minister accept the need for the Government to do more to encourage the more diverse provision of housing for older people, not just for the benefit of older people themselves but as a way of reducing costs to the public purse?
Baroness Hanham
My Lords, we have had a couple of debates in this House on the essential nature of getting proper housing for older people. I agree with the noble Lord that that would be helpful. It is up to local authorities to make their own plans and strategic decisions about the property that they need, which will of course include that which is necessary for older people so that they can either downsize and use their homes or have new build for them.
Baroness Maddock
My Lords, I am sure that my noble friend is aware that the various housing benefit changes are affecting the income forecasts for many social landlords. As a result, some social landlords are finding it difficult to borrow against those forecasts for new social housing. Can my noble friend tell me how the Government are responding to this, given that we have made a commitment to build more social homes for rent? Can she also say whether any of the announcements made in the Budget today will assist in this regard?
Baroness Hanham
My Lords, the announcement supporting privately developed housing will certainly assist. We are also very supportive of housing for rent and we have invested in it quite heavily over the past months and years. There is a complete recognition that housing for rent is essential. There is £10 billion of support for the delivery of new private rented housing as well as a further grant of £300 million for affordable housing. The Government are moving as far as they can to invest in the areas mentioned by the noble Baroness.
Lord McKenzie of Luton
My Lords, as has been said, today we have heard announcements of more generous discounts and shorter qualifying periods for the right to buy, but these are being made at the same time as the bedroom tax is about to kick in. Do the right-to-buy discounts apply in full whether or not the property is under occupied?
Baroness Hanham
My Lords, the regulations related to the right to buy are as they are at the present time. I do not believe that they have changed and therefore the noble Lord will know how they apply and that they are going to carry on as before.
Lord Swinfen
My Lords, my noble friend mentioned affordable homes in her first Answer. What is the Government’s definition of an affordable home?
Baroness Hanham
My Lords, an affordable home is one that in previous circumstances my noble friend might have known as social housing. It is provided by social landlords in the form of local councils or housing associations.
Lord Best
My Lords, can the noble Baroness tell us whether there is more news to come from the Chancellor or from her department on the subject of local authorities being able once more to build council housing, preferably retirement housing? Building bungalows and flats for older people would release some of their family housing.
Baroness Hanham
My Lords, the noble Lord will know that, by and large, housing is now provided by registered social landlords—housing associations—and that any money is passed to them. He will also know that the new homes bonus, which is made available to local authorities once they have completed extra housing, also helps. Under the new homes bonus scheme, some 400,000 properties have already been added.
Baroness Hollis of Heigham
My Lords, following the question of the noble Lord, Lord Bichard, about housing for the elderly, does the Minister agree with us that, as a result of the bedroom tax, pensioners who would like to downsize will not be able to because those of working age who do not want to downsize are being forced to do so?
Baroness Hanham
My Lords, I do not accept what the noble Baroness says. Pensioners are not affected by what she is pleased to call the bedroom tax, but which by everybody else’s standards is called the spare room subsidy measure—I thought that would trip lightly off my lips and would help the noble Baroness enormously. Pensioners living in houses will not be affected by these regulations.
Lord Naseby
Does my noble friend agree that the most important thing in relation to this question is to get new housing moving? As I understand it, my noble friend said 170,000 was the figure in the current year. On top of that, we have two incentives from the Budget—the equity loan and the mortgage guarantee—plus the right-to-buy provisions. Does that not all suggest that, whereas the previous Government had the princely total of 113,670 new houses built in their last year, we look like being not far off doubling that in the year to come?
Baroness Hanham
My Lords, there is a great emphasis, as my noble friend knows, on providing new housing. The initiatives which have already been taken by the Government for first-time buyers give support for that. The NewBuy Guarantee, which gives access to 95% mortgages for new-build homes, FirstBuy equity loans, the right to buy, and the Bank of England’s Funding for Lending scheme all indicate that this Government are very supportive of housing and recognise that it helps not only people get their homes but helps the construction industry, which is necessary to get growth.
Legislation: Data Retention
(11 years, 8 months ago)
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Lord Redesdale
To ask Her Majesty’s Government whether they will require Ministers to report on the financial and carbon consequences of any data retention requirements included in any future legislation.
The Parliamentary Under-Secretary of State, Home Office (Lord Taylor of Holbeach)
My Lords, it is government policy to conduct an impact assessment, including analyses of the economic and carbon consequences, for any regulation that affects the private sector or civil society, or significantly affects public services. The Government published the draft communications data Bill in June 2012 and it has undergone intensive pre-legislative scrutiny. We intend to bring forward revised legislation in due course, which will be accompanied by an updated impact assessment.
Lord Redesdale
My Lords, is the Minister aware that sending an e-mail with an attachment can cost about 4 grams of carbon for each e-mail? If you scale that up for the amount of data that the Government are asking to be retained over the next few years, the cost runs into the tens or hundreds of millions of pounds for each piece of legislation we pass. This also causes a massive problem in the amount of electricity that is needed in data centres. Considering that the country is facing an energy shortage, do the Government not agree that perhaps an impact assessment in respect of the data that are required to be retained should be published on the face of each Bill?
Lord Taylor of Holbeach
I will just make it clear that the Bill does not provide for the storing of the content of a communication, including the attachments to an e-mail. That would be interception, which is governed by a separate set of rules. Although we will seek to require providers to retain more data under the Bill, the amount of physical space and the electricity required for these data stores will be relatively low, particularly as providers may well take the opportunity to update to newer technology.
The Earl of Erroll
My Lords, as the Government are going to keep the address of every single website that someone visits, and where they are from, should the assessment not be talking about exabytes or yottabytes of data, not just the smaller amounts that the Minister is talking about, as I understand that they will have to be retained in such a way that they can be accessed by various services?
Lord Taylor of Holbeach
The noble Earl gets to the heart of what the communications data Bill is about. It is about who was communicating, when and from where, and how and with whom. It is not about the content of the communication, which CSPs will not be required to retain. To emphasise why this material is required, it is used in the investigation and prosecution of a broad range of crimes, including terrorism. CD has played a role in 95% of all serious organised crime prosecutions and every major security or counterterrorism operation over the past decade.
Lord West of Spithead
My Lords, does the Minister agree that this is about just the envelope and not the letter, that this material has always been available and it is merely that different ways of charging will mean that it stops being available? It is not anything new.
Lord Taylor of Holbeach
The noble Lord is very knowledgeable on this subject as he was responsible for it in the past. What he has said is absolutely true.
Lord Redesdale
My Lords, if the Minister will forgive me, my Question was about the actual carbon cost of the data, not of terrorism legislation. If you take the storage that is already covered by legislation from the Department for Work and Pensions and the Ministry of Justice—we are doing the figures at the moment—it seems that the electricity cost is greater than that of some small African countries. This is a growing problem that does not seem to have been addressed by any government department; it is not about a specific piece of legislation.
Lord Taylor of Holbeach
I come back to my noble friend by saying that I did address this issue. In seeking to require providers to retain more data, technical experts who have advised me and other Ministers in this matter say that the amount of physical space and electricity required for these data will be relatively low. We do not expect a significant carbon footprint or any notable impact on the British carbon commitment as a result of these proposals.
Lord Phillips of Sudbury
My Lords, I suspect that I am not the only Member of this House to find this discussion way over my head, yet it sounds of potentially great public importance. Will my noble friend the Minister consider sending round a sort of fool’s guide to these issues?
Lord Taylor of Holbeach
Unfortunately, we do not have a PowerPoint facility in the Chamber. Noble Lords will know that I am very keen that, when this Bill is introduced, we should have every opportunity to inform Peers of its implications and what it is seeking to do. I will take every opportunity to communicate with all Peers on this issue.
Prisons: New Prisons
(11 years, 8 months ago)
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The Lord Bishop of Liverpool
To ask Her Majesty’s Government what plans they have to ensure that all new prisons are environmentally sustainable.
The Minister of State, Ministry of Justice (Lord McNally)
My Lords, the Building Research Establishment environmental assessment method—BREEAM—sets the standard for best practice in sustainable building design, construction and operation, using recognised measures of performance set against established benchmarks. All new prisons are required to be BREEAM-assessed to a standard of excellence.
The Lord Bishop of Liverpool
My Lords, I thank the Minister for that very encouraging reply. Does he recognise that sustainable prisons, with productive gardens, workshops and even small farms, can help with rehabilitation and reduce reoffending, especially among the very high proportion of prisoners with mental illness?
Lord McNally
My Lords, the right reverend Prelate is correct, and that is why new prisons are designed to be able to facilitate opportunities for work, education, training and rehabilitation. That is the benefit of a new-build policy.
Lord Beecham
My Lords, will the Minister ensure that in addition to being environmentally sustainable, new prisons are located in places that are not too far removed from the places whence the prisoners have come and where they might find jobs after their release?
Lord McNally
My Lords, as part of the rehabilitation revolution we are looking at a release programme for prisoners whereby they can be located in a prison that gives them a chance for suitable training and, as I think I have mentioned before, with an emphasis on “through the gate” support after they leave prison, if possible in locations close to where they are going to live thereafter.
Viscount Bridgeman
My Lords, can the Minister assure the House that the new building programme will eliminate or reduce the problem of churning, which causes such distress to prisoners’ families?
Lord McNally
If we can get a secure, stable estate and a prison population that is not overcrowded, certainly. A lot of attention is given by prison management to locating prisoners close to families. As my noble friend will appreciate, there are other matters that have to be taken into consideration in ensuring that each prison is stable and well managed.
Lord Patel of Bradford
My Lords, with an ever increasing prison population—there are more than 84,500 men, women and young people in our estate—and with 46% of adult prisoners having 15 previous convictions or cautions, it is clear that prison is not working. Rather than building new prisons, what action are the Government taking to divert people from the prison estate in the first place?
Lord McNally
Indeed. I have drawn attention before to the very high number of people in prison. While we are building new prisons, we are also closing old prisons. Our older prisons are ill equipped for rehabilitation. I hope that the proposals that we will be bringing forward on the rehabilitation and management of offenders will address some of those issues. I could not agree more that there are better ways of spending taxpayers’ money than on circulating repeat offenders through our prison system.
Baroness Trumpington
My Lords, may I stretch the words of the Question a little further to include farming? Farming was formerly part of a prisoner’s range of choices, particularly with a view to future jobs and a lifestyle. Apart from that, the meat that they provided from pigs and cows was fed to the prisoners and was perfectly delicious, as I know from Pentonville prison.
Lord McNally
I think it was possible to have prison farms in the past. My noble friend is right about both the sustainability of such regimes and the benefit to prisoners. I am not sure that present circumstances would allow that, but I recently visited a prison in the north-west that had opened up a section of the land to develop an under-glass market garden. That was being very well used by the prisoners, who had gained great benefit both from the training that they received there and the personal satisfaction that such work gave.
Lord Elton
My Lords, my noble friend acknowledged the value of rehabilitation. Will he acknowledge the even greater value of people being prevented from getting into crime and say what plans there are to start skewing the budget away from punishment and towards prevention?
Lord McNally
The Government’s whole policy is to try to divert people from crime. We are looking to develop many more mentoring schemes to enable people who are vulnerable to be helped with their addictions and problems in a way that will divert them from crime.
The Earl of Listowel
My Lords, can I ask the Minister from the Cross Benches whether he is aware of the excellent example set in this regard by Wetherby young offender institution, where the young men have dug out a pond, tend their animals and can fish? It seems an excellent achievement by that institution.
Lord McNally
I am aware of that scheme, although I have not had an opportunity to visit it. However, it illustrates the wisdom of the right reverend Prelate’s follow-up point: that in the environment there are many possible solutions to reoffending and for rehabilitation.
Lord Marks of Henley-on-Thames
My Lords, does my noble friend the Minister agree that a great deal of international experience supports the right reverend Prelate’s point? In Hong Kong, there is a new 1,400-bed women’s prison, and a large number of units in the United States. Initial evidence shows that in such prisons there are important human, behavioural and social benefits as well as the obvious financial and environmental ones.
Lord McNally
I agree with my noble friend. Despite what the reports say in certain sections of our media, there is a far better chance of rehabilitating people in decent and humane conditions than in antiquated and inhumane ones.
Armed Forces: Pay
(11 years, 8 months ago)
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Lord Craig of Radley
To ask Her Majesty’s Government why they did not approve the 0.5 per cent increase in the X-factor supplement recommended by the Armed Forces Pay Review Body in its 2013 report (Cm 8571).
The Parliamentary Under-Secretary of State, Ministry of Defence (Lord Astor of Hever)
My Lords, earlier today my right honourable friend the Chancellor announced in the other place that we would fund an increase in X-factor, so this recommendation will now also be accepted. This will be welcome news for service personnel and their families who should receive the increase with their May pay. This positive response to the Armed Forces Pay Review Body recommendation also emphasises the importance and the respect that the Government accord to the views of the review body.
Lord Craig of Radley
My Lords, that is of course very welcome news, although I think it would be a shade fanciful to think that a topical Question could so rapidly change the Government’s mind. Nevertheless, because there has been a delay, can the Minister assure the House that the pay uplift will be made available on time in April, or will it be delayed and have to be backdated? I hope that the Government will do everything they can to ensure that it does not have to be backdated. Will this additional pay be available to full-time mobilised reservists as well as to service personnel?
Lord Astor of Hever
My Lords, service personnel will receive the increase from 1 May onwards. I understand that it is the general policy of all Governments not to backdate, to avoid adding complexity and risk to normal administrative operations. The noble and gallant Lord asked if the uplift in X-factor will be paid to mobilised reservists. X-factor is paid at the full level—currently 14%—to all ranks up to and including lieutenant-colonel or equivalent in the Regular Forces, full-time reserve service personnel on full commitment and mobilised reservists.
Lord Rosser
My Lords, the Government have made as nifty a U-turn as a London taxicab on implementing the X-factor supplement recommendation. Yet the contract for the chairman of the Armed Forces Pay Review Body, Alasdair Smith, is not being renewed. He said that, because of the late decision and the time needed to make another appointment, his successor will miss the first half of the year’s programme of work, including all the visits to members of the Armed Forces that are a hugely important part of the role. That statement indicates that this was a sudden decision by the Government, made following receipt of the pay review body’s recommendations at the end of January, since just over two weeks later Alasdair Smith was told that he would be finishing at the end of this month. In view of their hasty U-turn, will the Government now offer Professor Smith a further term as chairman? After all, he will have the confidence of members of the Armed Forces since he upheld the independence of the pay review body—or is that the problem?
Lord Astor of Hever
My Lords, there is no link between the Prime Minister’s decision not to reappoint Professor Smith and the increase in X-factor. The Prime Minister’s decision not to extend Professor Smith’s appointment represents broader government policy regarding no automatic right to reappointment to non-departmental public bodies such as the pay review body. The decision is in line with the Commissioner for Public Appointments’ Code of Practice for Ministerial Appointments to Public Bodies. An interim chair, John Steele, has been drawn from the remaining members of the AFPRB until a formal replacement can be appointed.
Lord Palmer of Childs Hill
My Lords, from these Benches I also welcome the inclusion of the uprating in the X-factor payment. However, what remit did the Government set for the Armed Forces Pay Review Body before it started work on its most recent report?
Lord Astor of Hever
My Lords, the remit for the 2013-14 pay round and the Armed Forces Pay Review Body’s terms of reference are contained within its 2013-14 report, copies of which are available in the Library of the House. The report also includes a letter to the body from the Chief Secretary to the Treasury in which he provides details of the Government’s approach to public sector pay for the 2013-14 pay round.
Lord Magan of Castletown
My Lords, will my noble friend explain to us in detail what exactly the X-factor supplement is?
Lord Astor of Hever
My Lords, the X-factor was introduced in 1970 and is paid as an addition to base pay. It is paid to reflect the relative disadvantage between the conditions of service experienced by members of the Armed Forces over a full career and conditions in civilian life that cannot be taken directly into account in assessing pay comparability. Those factors include danger, discipline, turbulence, separation and liability for duty at all times.
Baroness Farrington of Ribbleton
My Lords, I listened carefully to the noble Lord’s reply to my noble friend’s question. I heard him explain that it was perfectly within normal procedure for a contract not to be renewed, but I missed his answer as to why the contract had not been renewed in this case.
Lord Astor of Hever
My Lords, I said that the decision is in line with the Commissioner for Public Appointments’ Code of Practice for Ministerial Appointments to Public Bodies. The Government believe that the habit of automatically renewing those appointments has to stop. We need to bring fresh blood into jobs such as these.
Lord West of Spithead
My Lords, I congratulate the Minister on the Government’s decision to send HMS “Daring” to Australia for the centenary of the Australian Navy. That leaves us with 18 escorts for the rest of the world. Does not the Minister agree that 18 is far too few and that we need to get going on the order for the Type 26 ship?
Lord Astor of Hever
My Lords, the noble Lord has used great imagination to bring HMS “Daring” into this Question. I have been preparing for the X-factor this afternoon, not HMS “Daring”.
Lord Ramsbotham
My Lords, during the passage of the Armed Forces Bill last year, we discussed the question of the Armed Forces covenant. We were given to understand that the Statement made by the Secretary of State for Defence each year on the covenant would be taken in this House, giving us an opportunity to ask questions about it. That did not happen. I suspect that if it had, my noble and gallant friend’s Question could have been put earlier. Will the Minister undertake that in future years the Statement on the Armed Forces covenant will be taken in this House?
Lord Astor of Hever
My Lords, I am always ready to come to this House for any Statement. It is not always our call; in many cases it is the Opposition’s decision whether to accept the Statement.
Business of the House
(11 years, 8 months ago)
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Lord Hill of Oareford
That if the Jobseekers (Back to Work Schemes) Bill has been read a second time, Standing Order 46 (No two stages of a Bill to be taken on one day) be dispensed with on Monday 25 March to allow the Bill to be taken through all its remaining stages that day.
The Chancellor of the Duchy of Lancaster (Lord Hill of Oareford)
My Lords, I beg to move the Motion standing in my name on the Order Paper.
Lord Foulkes of Cumnock
My Lords, I thought that at least in moving the Motion, the Leader of the House would have the courtesy to explain why Standing Orders are being dispensed with, particularly as we have so many Cross-Benchers here today to listen to the debate on what is a very controversial Bill, and as we have plenty of time—or at least we would have, as I said last Thursday, when the Leader of the House was not present, if he had not decided summarily and without any consultation to send us off for an extra week’s holiday. I am sure that we would be better served here looking at this Bill properly and in detail rather than having that extra week. I hope that the Leader of the House will have the courtesy to explain to the House why he is moving this Motion.
Lord Hill of Oareford
My Lords, there are two separate issues. One is the need for emergency legislation, the other is to do with the timing of the Easter Recess. I know that there is a lot of strong feeling in the House about the timing of that. I recognise that. A number of noble Lords have made that case to me directly. In these circumstances, the usual channels, just as was the case when the noble Baroness, Lady Royall, was Leader of the House and, before that, Chief Whip, do their best to give the House notice and to order the business in such a way that we can land things when we aim to. We do not always succeed. We do our best, and in doing so we have to strike a balance between the business before us and the costs—the best part of £500,000—of this House sitting for a week.
With regard to the emergency legislation, we have set out the case for that in the Explanatory Memorandum to the Bill. In essence, there is an urgent need to legislate to save £130 million of taxpayers’ money.
Criminal Justice Act 2003 (Conditional Cautions: Code of Practice) Order 2013
Baroness Anelay of St Johns
That the draft orders laid before the House on 9 January and 11 February be approved.
Relevant documents: 16th and 20th Reports from the Joint Committee on Statutory Instruments, considered in Grand Committee on 12 March.
Local Authorities (Contracting Out of Tax Billing, Collection and Enforcement Functions) (Amendment) (Wales) Order 2013
(11 years, 8 months ago)
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Baroness Randerson
That the draft order laid before the House on 6 February be approved.
Relevant document: 20th Report from the Joint Committee on Statutory Instruments, considered in Grand Committee on 12 March.
Immigration and Nationality (Fees) Regulations 2013
(11 years, 8 months ago)
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Lord Taylor of Holbeach
That the draft regulations laid before the House on 25 February be approved.
Relevant document: 20th Report from the Joint Committee on Statutory Instruments, considered in Grand Committee on 18 March.
Neighbourhood Planning (Referendums) (Amendment) Regulations 2013
Lord Ahmad of Wimbledon
That the draft regulations laid before the House on 14 and 25 February be approved.
Relevant documents: 20th and 21st Reports from the Joint Committee on Statutory Instruments, considered in Grand Committee on 18 March.
Growth and Infrastructure Bill
17:54 - Division on Amendment 50 - Ayes: 232 / Noes: 178 - Amendment 50 agreed.
Lord Flight
“(12) Shares issued or alloted under subsection (1)(b) up to a value of £25,000 will not be treated as a benefit for the purposes of the Income Tax (Earnings and Pensions) Act 2003.”
Lord Flight
My Lords, I have always been a strong supporter of employees owning shares in the companies that they work for, particularly smaller companies. In my own history, virtually everyone had shares in the company that I built up in the 1980s and 1990s. Obviously, the principle is observable in groups like John Lewis. It is self-evidently very positive, not just commercially but when people feel part of the business for which they are working.
Anyone is being blind if they do not perceive that employment law has strayed across the boundary of discouraging employment. There are good reasons for much employee protection, a cause that has been fought for over almost 200 years. However, we are now in an area where—dare I say?—there would not have been just 1 million new jobs created over the past year; if employment law was not so discouraging of taking on new people, there might have been 2 million new jobs. Again, in my own history I have seen too often how people are put off by the costs and risks involved. This House is slightly out of touch if it does not perceive that employment law actually discourages us in succeeding economically and producing more jobs.
Lord Martin of Springburn
The noble Lord mentioned John Lewis. We all know that everyone working in John Lewis is a partner and therefore a shareholder but, to my knowledge, John Lewis has never asked anyone to give up their statutory employment rights.
Lord Flight
I am sure the noble Lord is correct. The employees who had shares in the company I built did not give up their employment rights, albeit that at that time they were not quite as discouraging of employing people as they are today. The point I was making was that I believe hugely in employees owning shares in their business. On the other hand, it is blind not to see—I understand where the noble Lord comes from, and very decent it is—that employment law has strayed across the boundary to where it does more to discourage new jobs than to protect people.
The point I was working my way towards and commenting on was that the proposals in Clause 27 are clearly not of interest to or appropriate for a lot of people; they are appropriate for certain categories of people, above all, for people who feel that their contribution to their business is such that they do not need to be gold-plated by the extent of the employment protection laws that we currently have.
We now come to the rub, where I hope to encourage the Government further, albeit that it is Budget day today. The limit of only 2,000 shares on which you do not pay tax is too low. There is complete misthinking by the Treasury. Without this legislation, there would be no additional tax whatever because no one would have any more shares to pay any tax on, so it is not a question of losing tax revenues, but of the potential for forgone tax revenues that would not exist if the scheme did not exist.
On the forgone bit, the issue is that if people have worthwhile equity—£20,000 or £30,000—if they are going to have a tax bill of £10,000 or £15,000 including national insurance, they will not be able to afford to do it. People will not have that sort of money lying about in the bank to pay that sort of tax bill. To borrow money to acquire shares in a relatively high-risk small business is not a particularly wise thing to do because it may not succeed and you may be left with the money you have borrowed and no asset against it. The Government ought to think again about the tax position of shares under the employee shareholder scheme. I repeat that I think the starting point is wrong. It is not a tax cost, but how much tax will be forgone as a result of this scheme. The point is simple: unless there is a larger amount with no tax and national insurance liability, people will not take it up so there will be no tax revenue anyway.
The logic is pretty clear. Imagine working for a smaller business, which might employ 10 to 100 people and may be in a new area. One of the great things about success in this country is the number of businesses growing in new, high-tech areas, but it is a tough, competitive world with American businesses trying to out-compete you and products coming in cheaply from China. Not all these businesses are going to succeed. If you are enthusiastic, you can certainly say, “I really want to make this succeed. I would like to take advantage of this scheme. I candidly think that my existence in this company is not about employment protection law, but is due to my working my butt off to make a success of it”. People will want to take advantage of it. However, if they are going to be given a large tax bill, they will either not be able to afford it or the risk-to-reward ratio will not be right.
I encourage the Government to think again about the tax position as part of my genuine support of the proposal. Dare I say that many in this House have not really thought it through? They have not been entrepreneurial. They have not worked for a small business. It is an attractive opportunity for people. Well may they take the risks, succeed and build up some value in the company for which they are working. I ask the Minister to go back to the Treasury and reconsider a greater degree of fiscal generosity. I beg to move.
The Earl of Erroll
My Lords, I will speak only to this amendment. We will have the debate on whether employees should give up rights for shares when we deal with the next amendment. I restrict myself purely to the tax issue here. It is a serious point, because I have hit this when I have been offered share options. Because you receive the benefit, theoretically, you are meant to pay income tax on it in that year. You do not really have any money to pay it with because you have not yet been paid. If you are rich, you can use these benefits and invest in start-up companies using the SEIS: the Seed Enterprise Investment Scheme. However, you must have some other income against which to offset it, so taking this up is of no interest to the average employee. They have no other outside income. They will have nothing to pay the tax with because of the cash flow: they are being forced to pay a tax when they have not yet received the money. It is therefore complete lunacy, for the logic of this clause, not to accept the amendment of the noble Lord, Lord Flight. It makes this clause work.
Whether it should exist is a separate issue that we are about to discuss in the debate on Amendment 50. I accept that entirely. However, if the clause is to stay in the Bill, the amendment improves it greatly. The clause will then achieve its purpose of trying to get employees involved in the running of the company and the drive to make that company succeed. However, if they cannot afford to take up the shares because of the tax regime, and there is an anomaly in it and it will just fail anyway—in which case, Amendment 50 will be redundant, because no one will bother with the scheme.
Lord Forsyth of Drumlean
My Lords, very unusually, I find myself in disagreement with my noble friend Lord Flight. Normally, we are at one on these matters. I have considerable respect for his experience in the City, and I understand what has motivated him to table the amendment.
I do not propose to talk about Clause 27 until we come to the amendment in the name of the noble Lord, Lord Pannick. Frankly, I am surprised that this clause has survived so long. The scheme is ill thought through, confused and muddled. I will develop those arguments when we come to the next amendment.
This amendment, however, is an absolute open goal to allow the setting up of a huge tax-avoidance scheme. There is no restriction on people changing from being an employee to an employee shareholder. Therefore, they could get £25,000 from their employer as a tax-free sum. On the shares they could make tax-free gains of £50,000. This is therefore a handout of £75,000 to people who just choose to change their employment status. I find that very difficult to justify as a measure.
I have grave reservations about Clause 27. It confuses two desirable things: one is having sensible employment protection legislation, and the other is having sensible proposals for encouraging employee share ownership. My noble friend Lord Younger of Leckie, who I think will be responding to this debate, sent me a very helpful letter that sets out some of the concerns that have been raised about the scheme as a whole. I will concentrate on the issues that arise from this particular amendment.
The first point—and here my noble friend Lord Flight has not shown his normal attention to detail—is that there can be no question of anyone purchasing the shares. It is a condition of the scheme that the shares are given for free. In effect, we are producing a tax-free handout. One of my worries was how, in an unlisted company, perhaps a start-up company, you value the shares. The employer might have a particular view of the value of the shares, as might the employee. The expense and difficulties involved in valuing these shares would be considerable.
I hope my noble friend Lord Younger will not mind me reading out what he says in the letter about the tax treatment of the shares: “When an individual receives shares as part of an employment agreement, these are usually subject to income tax in the same way as that person’s salary”. That is correct, and it is what my noble friend Lord Flight is trying to address. However, he goes on to say: “In some cases income tax will be chargeable on the value of the shares at the time that the employee receives them. However, where certain conditions are attached to the award of shares, for example a requirement to stay in the job for a period, or a no-sale requirement, any income tax that would otherwise be chargeable on the award of the shares may be reduced or removed. In such cases, income tax would be chargeable on the shares at a later date. The precise detail of how the tax rules will apply to an employee shareholder depends upon the type of shares that are awarded. An employer should be able to confirm to an employee shareholder what type of shares they have received”.
This is a complete muddle. Are they shares which they hold, shares that vest at a later date, or shares that have to be sold back at a particular value? You need to have clarity on that before you even begin to consider the tax treatment. The normal tax treatment in employee share schemes is that the shares given usually vest over a period of time, and it is the point at which they vest that tax becomes payable. It is very unclear how that would work in the context of my noble friend’s amendment. Would the £25,000 apply when the shares were vested, and if they are simply options, or the ability for shares to vest subject to particular conditions, how does this offer the employee, who is giving up employment rights, any kind of security?
I entirely understand why my noble friend has tabled the amendment. He has seen that the scheme is not particularly attractive from the employee’s point of view, and the tax rules are certainly unclear. However, this would be used by people. The dead-weight cost of this amendment would be enormous, because anyone working for a company who had no possibility of being fired would want to avail themselves of what would be a huge, tax-free gift.
Lord James of Blackheath
My Lords, I feel mounting concern as a result of what I said in Committee about this clause in a discussion on the financial assistance Act. What we have just heard makes my original anxiety even greater. I asked the Minister at that time whether he would give an opinion as to the application of the Act to this clause. I think the situation has got even worse. Where there is in effect a deal between a company and the Inland Revenue to give somebody a tax advantage, or at least a complicit arrangement whereby they co-operate for it, surely there is a breach of the laws that were brought in at the time of the Guinness and Blue Arrow fraud cases and that prohibit any company from giving financial assistance to any employees for the purchase of its own shares. This seems to me to be exactly what is occurring here. It is highly dangerous. We cannot have a scheme that criminalises companies and their employees accidentally and at the same time.
Lord Stewartby
My Lords, I will not follow in detail what my noble friend Lord Flight said in his excellent introduction to this debate, because he said most of what I would like to say, but much more eloquently than I could. What comes out of this debate, despite the various points that have not yet been cleared up, is that this is a voluntary activity. Employee shareholders would come about only if the shareholders wanted them to and voted for them without coercion. It is an experimental proposal, and although I do not share the doubts that some have about its merits I do think it is potentially a somewhat complicated arrangement.
The best thing to do when you have a proposal of this kind is to test it out. If you do not pass the legislation, you will never have a chance to see whether it works. My own view is that the demand for this type of opportunity will become more evident as time goes on. It is very suitable for high-risk, rapid-growth businesses. Of course, there will be failures and shortcomings, as there always are in speculative areas of investment, but this belongs to the area of high-risk reward, and I would like to see it given a chance to show its form.
The Bill in effect constructs a new type of relationship between shareholders and members of a company and adds a new status, giving it a certain novelty. This proposal is sensible, as my noble friend has said, and the way ahead will not emerge until the thing is given a chance. The proposal is imaginative and innovative, and I think it would be a good thing if we put it on the statute book.
Lord Adonis
My Lords, I am sorry to disagree with the noble Lord, Lord Stewartby, but to my mind when you have a totally mad idea like the one before us the best thing is not to test it out but to kill it at birth, and I hope that is what we are going to do in the debate that is to follow.
In response to this amendment I should say that never in my life, at least knowingly, have I been in such agreement with the noble Lord, Lord Forsyth—and we look forward to his contribution in the debate that follows. As he says, Clause 27 is ill thought through, confused and muddled. The amendment proposed by the noble Lord, Lord Flight, achieves the remarkable feat of making it even worse, on which I congratulate him. However, I think that the mood of the House is that we should get on to the substance as soon as possible, and I hope that we can now do so.
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Viscount Younger of Leckie)
My Lords, I thank my noble friend Lord Flight for raising this matter, and for his general support for the principle of the clause.
I would now like to speak to Amendment 49C. As noble Lords have said, we will have a chance to debate the fuller aspects of the clause under the next amendment. In effect, this amendment calls for up to £25,000 of share value received by employee shareholders to be free of income tax and national insurance contributions. I note my noble friend’s considerable knowledge of this area from his time shadowing Treasury Ministers and from his chairmanship of the Enterprise Investment Scheme Association, but on this occasion his proposals are not in tune with the underlying aims of the policy. The employee shareholder status is not a new tax-advantaged employee share scheme or an investment incentive, although it may be used alongside existing reliefs in these areas.
In practical terms, the cost to the Exchequer of pursuing this amendment would be prohibitive. A tax relief of that sort of magnitude would make it necessary to attach a great many prescriptive rules to ensure that benefits were targeted and to prevent abuse: for example, by businesses using it as a means of transferring taxable income into employee shareholder shares. I acknowledge that my noble friend Lord Forsyth of Drumlean made these points rather eloquently. This would have the effect of introducing considerable complexity to the new status, working against our stated aim of offering a new option that is flexible and accessible to a wide range of companies.
Of course, tax policy has a part to play in this new employment status. We have listened carefully to concerns that the income tax position could be a significant disincentive for some individuals. We recognise that this could be an issue for a very few and have addressed it. It is a long-established fact, and certainly not unique to employee shareholders, that when a person receives shares as part of their employment, they may be liable for income tax and national insurance contributions on those shares. This is a consequence of the normal tax rules and the way in which income gained from employment is taxed. We must also remember that when an employee shareholder sells their shares, gains from the first £50,000 of shares given to an employee shareholder will be free from capital gains tax, which is part of the wider aspects of the scheme.
I informed the House that the Government were considering an option which would allow the first £2,000 of shares to be given to employee shareholders without incurring income tax or national insurance liabilities. The Chancellor announced in his Budget earlier today the decision to proceed with that option. This means that, typically, if an employee shareholder were to receive shares worth £2,000, no income tax or national insurance contributions would be chargeable when they received them. If they received £2,500 worth of shares, any tax would be due on the £500 excess.
The Finance Act contains several measures that will prevent misuse of the employee shareholder employment status.
Lord Forsyth of Drumlean
Will my noble friend give way? I apologise for interrupting.
Viscount Younger of Leckie
If I may, I am about to address some points that my noble friend made concerning the tax status.
For example, we do not want directors to manipulate the new status by making fake jobs for family members, which may have been in the mind of my noble friend Lord Forsyth when he made his earlier comments. We want this employment status to be attractive to a whole range of people. If we allow that no income tax or national insurance contributions are payable on the first £25,000 of shares, we think this will create only a disproportionate tax benefit for higher earners. This is about a new employment status that is open and attractive to a range of prospective users.
My noble friend Lord Forsyth asked a number of questions relating to how different types of shares would be treated and what this meant in tax terms for individuals in employment. When a person agrees to become an employee shareholder, the employer should be able to tell them what type of shares they will receive. The types of shares an employee shareholder receives may vary, as I think my noble friend indicated. First, they could be non-restricted shares. These are shares awarded without any ongoing conditions, limitations or requirements that affect their market value. If an employee shareholder holds non-restricted shares, they are usually in the same position as an external investor in the company.
Secondly, restricted shares are shares awarded with conditions, limitations or requirements attached that reduce their value. For example, an employee shareholder may not be able to sell their shares for a certain period or, if they leave the company, they may not be able to retain their shares. The employer may agree to buy the shares back from the employee shareholder.
Thirdly, forfeitable shares are restricted shares awarded on the basis that within a certain period of time, or on the occurrence of certain events, the employee shareholder may have to forfeit them and in return will receive less than their market value. When the tax is payable on these shares will depend on the type of shares that are offered. As my noble friend Lord Stewartby said, this is a voluntary arrangement, under which the individual will go into an agreement with the employer, and the type and status of the shares will be decided with their agreement. That will then lead, by agreement, to the point when the tax will be payable.
Baroness Brinton
Does the Minister accept that the flexibility for employees to negotiate the terms of any restrictions in shares will itself be restricted if a number of employees are being offered shares, because the capacity within the company to vary terms will be extremely difficult? In practice, the employee will have no flexibility at all to negotiate.
Viscount Younger of Leckie
My noble friend is taking rather a negative view. We need to look at the opportunities that the whole scheme offers. The employee shareholder could decide not to accept any shares or such a role if the situation that my noble friend mentioned applied. It may not suit them; they need to get advice and go into this scheme with their eyes open.
Lord Forsyth of Drumlean
Is my noble friend saying that the scheme will work for restricted stock that is subject to conditions? He seems to be saying that restricted stock will be treated in the same way as tradable shares, to the extent that they can be tradable. Perhaps I should declare an interest in that I have been given shares in the form of restricted stock on the condition that if I left the company or was dismissed the shares would be forfeited. Could conditions that effectively took away people’s employment rights be applied to restricted shares? How would that be defined? If it is just something to be negotiated between the employer and the employee, could an employee not find that he gives away his employment rights for some shares that he would lose if he was sacked?
Viscount Younger of Leckie
The discussions will take place before the employee shareholder goes into an agreement. If they are at all unsure, they have the right not to do so. Different types of shares and share schemes beyond those that I have highlighted today may be applicable. That, as my noble friend said, will remain a matter for discussion between the employer and the employee shareholder.
Baroness Garden of Frognal
My Lords, I remind Members of the rule that on Report no Member should speak to an amendment more than once, unless it is to seek brief clarification.
Lord Forsyth of Drumlean
That is precisely what I am doing. I am seeking clarification on an important point. If someone comes to work for a company that has a scheme involving restricted shares that you would lose if, for example, you were dismissed, how can that person negotiate when they are told, “This is the job and these are the terms”? What is their negotiating position if 100 people have already signed up? If the Minister is correct, does that not drive a coach and horses through the benefit, limited as it is, that applies to the employee?
Viscount Younger of Leckie
That takes me back to the question raised by my noble friend Lady Brinton. If there are too many employee shareholders to make this work, there may indeed be no room for another employee shareholder. I say again: the opportunity is voluntary and the terms are to be agreed between the employer and the employee. That is all that needs to be said. It is exactly why we are not being too prescriptive with this system. We are providing an opportunity for employers to take up this scheme and for employees to share in its risks and rewards.
Lord Flight
My noble friend Lord Forsyth makes a fair point. If tax is to apply, it is difficult to determine how the value of the shares in question is to be assessed, given that they may have certain characteristics. However, I will turn that point on its head, in that it is an argument for there being no tax bill at all because the problem goes away if there is none. My basic point is that common sense states that no one will be much interested in a deal whereby you give up your employment rights for just £2,500 of equity. There should be potential for much greater gain. Something like seven out of 10 smaller businesses in this country tend to fail as a result of taxation being too high and the public sector too large. The situation is not like that in Hong Kong, which is much more successful.
The equity element would be of high risk for people in SMEs. I repeat my point: it is not a question of the Government losing revenue; they will not get any revenue under the clause as it stands because not many people will take advantage of it. Therefore, the Government will not lose any revenue. If they believe in the principle, which I believe in very strongly, there has to be an attractive risk/reward ratio. To my mind, one way or the other, that requires the value of shares on which there is no tax charge to be more than £2,500, although my figures are essentially for illustration.
Lord Pannick
Lord Pannick
Your Lordships now come to whether Clause 27 should stand part of the Bill. As noble Lords have heard, the clause allows for an agreement by which an employee can receive shares worth £2,000 or more at the date of issue and then lose his or her rights to claim unfair dismissal, statutory redundancy pay and other employment rights.
Clause 27 was very heavily criticised in the debates in Committee. There was—I put it as moderately as I can—very little enthusiasm indeed for it on the government Benches or on other sides of the House, with the conspicuous exception of the noble Lord, Lord Flight, whose main argument in defence of the clause, if I understand him correctly, is that the deal will not be very attractive and therefore not many people will take it up.
There are four main objections to Clause 27 that the Government failed adequately to answer in Committee. One could identify many more objections but I will confine myself to four. The first is that the clause is objectionable because the employment rights were created—and have been protected by all Governments, Conservative and Labour—precisely because of the inequality of bargaining power between the employer and the employee. To allow these basic employment rights to become a commodity that can be traded by agreement frustrates the very purpose of these entitlements as essential protections for the employee, who lacks effective bargaining power.
The second objection concerns the jobseeker. Under the clause, an employer will be able to refuse to offer employment to applicants who decline to enter into a Clause 27 agreement. The irony, of course, is that the worse the job market for employment, the more willing the applicant will be to give up his or her employment rights in order to take the job, and the worse the job market, the greater the employee’s need for these basic protections against unfair dismissal and redundancy.
The application of Clause 27 to the jobseeker is particularly indefensible because the Government have now issued guidance, which was promised at Committee stage but which we did not have, that makes it very clear that a person will lose their jobseeker’s allowance if he or she refuses to take a job offer on Clause 27 terms; that is, they will lose basic employment rights. The guidance says that the terms and conditions under which the job is offered are not a good reason for refusing to apply for the job. There is a very limited exception which refers to the financial implications of receiving the shares, to which I will come in a few moments.
The absence of protection for the job applicant means that Clause 27 does not simply allow for an agreement to give up employment rights. In practice, it imposes on the jobseeker considerable pressure to take employment on Clause 27 terms. Clause 27, read with the guidance, will mean that the jobseeker is being made an offer which he or she cannot refuse—an offer that they must give up their employment rights. That is the second objection.
The third objection to Clause 27 was explained in Committee by a number of Peers from the government Benches—I stress, the government Benches—who have business experience. They said that the provision would be positively damaging to industrial harmony and would not be used by any sensible employer. Since this is Report stage, perhaps I may briefly report to the House what noble Lords from the government Benches said. The noble Lord, Lord Vinson, stated that,
“the whole point of wider industrial shareholding”—
with which we all, I apprehend, agree,
“is to try to create a sense of common purpose”—[Official Report, 6/2/13; col. 269.]
in the workplace. Clause 27 will do precisely the opposite. To deny industrial rights to employees will negate trust rather than enhance it. The noble Lord, Lord Strasburger, made a similar point at col. 272.
Perhaps I may quote the noble Lord, Lord Deben, who has considerable experience in small businesses. His words are so important and I could not possibly improve on them. He said:
“I cannot imagine any circumstances whatever in which this would be of any use to any business that I have ever come across in my entire life”.—[Official Report, 6/2/13; col. 293.]
I hope that it is appropriate for me to say that I have spoken to a number of noble Lords on the government Benches since Committee. Many of them share the sentiments of the noble Lord, Lord Deben—some of them in language even stronger than his, and even stronger than the helpful language that we have heard this afternoon from the noble Lord, Lord Forsyth of Drumlean.
As the Minister well knows, there is not simply a lack of enthusiasm for Clause 27 but a degree of opposition to it on the Minister’s own Benches that makes the Government’s commitment to it incomprehensible. To use the word of the noble Lord, Lord Deben, in Committee at col. 294, the Government’s approach is “mystifying”. In Committee, at cols. 298-300, the Minister told the House that the Government calculated that 6,000 companies would be interested in Clause 27. The noble Lord promised the Committee that he would provide the evidence that supported that statement, but I have received no such evidence and I do not believe that any other noble Lord has seen it. Therefore, I ask the Minister: does the evidence exist? If so, why has it not been provided? If it does not exist, will he please withdraw the statement that 6,000 companies are interested in acting under Clause 27?
My fourth and final objection to Clause 27 is that the employee and the prospective employee will not be given the minimum necessary protection to understand what they are being asked to give up. The Government have refused to accept that statutory rights should be lost only if the agreement is in writing and if the individual has received legal advice on the consequences of the agreement from an independent adviser. Parliament has specified such conditions in Section 288 of the Trade Union and Labour Relations (Consolidation) Act 1992 in the context of a compromise agreement to settle particular employment disputes and tribunals. However, no such protection will apply here.
I recognise that the Government have published general advice to employees, but that is really a poor substitute for specific advice to employees from an independent adviser in their particular circumstances. The need for advice is particularly important when the value of the shares when issued may well be higher than their value later on and when there are tax implications for the employee of receiving the shares if they are worth more than £2,000. As I understand it, the employee or prospective employee who enters into an agreement to give up his employment rights for shares with, say, a nominal value of £3,000, will get a nasty surprise when he or she receives their next month’s pay packet. In the real world, the jobseeker and the employee need to know the implications.
The noble Lord, Lord Flight, said that Clause 27 may not be appropriate for all types of employee. The problem of course is that Clause 27 applies to all types of employee, with all the detriments I have mentioned. For all those reasons, I ask the House to reject Clause 27 and I very much look forward to the debate on this issue. I beg to move.
Baroness Brinton
My Lords, I am grateful to the noble Lord, Lord Pannick, for so eloquently outlining the case against the proposals in Clause 27 and I was happy to add my name to the amendment, which your Lordships' House has discussed at considerable length at earlier stages of the Bill’s passage.
I remain bemused with the basic philosophy behind the clause. We are told that the scheme is aimed at small businesses that want to grow fast and motivate their workforces. We have heard that employees will take a significant reduction in their employment rights and face tax and NI demands on the free shares that they have been given over £2,000 as they receive them.
I assume that the minimum of £2,000 is for ordinary shares, but given the interchange on the previous amendment I am not convinced that they would necessarily be ordinary shares. In a number of years, possibly with a following wind, they might increase in value, although the House should note that the majority of micro and small companies do not make large returns for their shareholders in the early years. That rarely takes less than eight years or a decade. Worse than that, while the employee currently in a firm can choose not to take part, the applicant on jobseeker's allowance would have no such luxury—a point clarified in the letter from the Minister on 13 March. Either a scheme is voluntary or it is not. It is clearly not for those on jobseeker's allowance. This provision is supposed to encourage growth. We need to go back a step to the coalition agreement’s commitment to growth. With such a key strategy in mind to help SMEs, we should do all that is within our power to assist them. Clause 27 would do the opposite. If an employee has the choice between a company that offers the usual employee benefits and another that exchanges these rights for shares in the company, the evidence suggests that employees would rather maintain their benefits, especially in the current recessionary climate. That was corroborated by my own experience speaking with employees working for high-tech SMEs, who are bemused that they would want to demotivate their staff during the very difficult early days of a company when it is developing products and just beginning to enter the marketplace and unlikely to be making a profit, let alone anything that they could distribute to shareholders.
Baroness Turner of Camden
My Lords, I opposed this clause at Second Reading and in Committee, and I do so again. I support the noble Lord’s amendment to remove this clause. I believe this Bill to be one of a series of government Bills designed to remove employment rights from individual workers without seeming to do so. The clause seeks to get workers voluntarily to give up employment rights by pretending to make them part-owners of the company. We are told that it will be entirely voluntary to become an employee shareholder. Will it really, when there is so much unemployment and consequently high concerns about employment security? People will be told that it is in their interests to become employee shareholders and that it will offer better internal progress, possible promotion and security, so that they do not have to worry about these old-fashioned employment rights. It is a way of dividing the workforce as well: an end to collectivity, with no unions to represent or negotiate for workers or to press for higher wages.
This Government do not like employment rights. LASPO, which we discussed in this House last year, rules out legal aid on employment law and on welfare. This clause is another way of getting rid of employment rights which previous generations fought hard to establish. The Government want tame workforces, where employers can hire workers—cheaply of course—and get rid of them easily when no longer required; in other words, disposable people. It is really surprising why this should be regarded as modern when it takes us back about 120 years. I do not believe that people should ever be regarded as disposable. I oppose this clause because that is what it is all about. The possession of shares in no way compensates for the loss of employment rights such as the right not to be unfairly dismissed, the right to a redundancy payment in suitable cases; the right to flexible working, and the rights relating to constraints on the notice about maternity and parental leave. I do not really believe that it is intended to.
I do not think the Government will succeed with this. Good employers do not like it. Shareholding schemes already exist in some enterprises without workers having to give up employment rights in order to participate—the John Lewis Partnership is one such enterprise. This clause is backward-looking and dishonest. The Beecroft recommendations were widely opposed when pronounced and it was clear that they could not be introduced in quite that form, so we have Beecroft by the back door, to persuade workers voluntarily to give up employment rights to which they are currently legally entitled. We should throw out this clause. The TUC is against the clause and tells us that it has the potential not only to remove employment rights but to cause hardships to employees and their families. It can also open up damaging tax loopholes, to which reference has already been made. It is thoroughly unpleasant and should be thrown out by this House.
The Lord Bishop of Bristol
My Lords, I have put my name in support of this amendment to remove Clause 27 for two main reasons, one general and one specific. In preparing my thoughts on what I was going to say today, I am grateful to a number of family charities, including the Family and Parenting Institute, the Daycare Trust, Working Families and the Fawcett Society, for their efforts in making the case against what I sense many of us instinctively feel is a seriously flawed proposal, which will create many unintended consequences.
Permitting companies to purchase certain rights in this way seems ethically wrong in principle. It is foremost the precedent of allowing employment rights to be bought and sold like a commodity that I believe must be rejected. Basic safeguards against unreasonable employer behaviour should not have a price tag attached to them. To quote from Michael Sandel’s latest book:
“Such treatment fails to value human beings as persons, worthy of dignity and respect; it sees them as instruments of gain and objects of use”.
For example, the right to protection against unfair dismissal, through placing a responsibility on employers to act reasonably, discourages arbitrary behaviour and the sham redundancies that can be used as a cover for discrimination or to penalise whistleblowers. It is not enough to give employees who have such unfortunate experiences recourse to an employment tribunal; employment law must discourage the behaviour from taking place at all. Likewise, redundancy payments are a modest but important safeguard for employees, providing a minimum cushion to support people who have lost their jobs and have family and financial commitments. Employees acquire these rights only after two years of service and they represent a proportionate responsibility for employers whose employees have made a long-term commitment to their businesses.
These safeguards are particularly important because there is no provision for advice for jobseekers before taking up this kind of contract. This point has been well made. I expect therefore that many workers who find themselves in the employee shareholder category will be those who are most vulnerable to poor employment practice, where the imbalance in power and financial means between employer and employee is most marked. Employment law is effective precisely because it constitutes a coherent framework based on clear principles of fairness and responsibility. Allowing companies effectively to buy off those rights undermines the integrity of that framework.
More specifically, I am also very concerned that employee shareholder contracts are not family-friendly and could discriminate against women. Women, particularly those with caring responsibilities, are most likely to exercise the right to request flexible working and will be most affected by the requirement to give longer notice periods when returning from parental leave. They will find it more difficult to take up the employee shareholder status and may be indirectly discriminated against in the recruitment process as a result, either being overlooked by potential employers or pressured into accepting the status as a condition of a job offer. Whatever the take-up of this new employment status, it will create a new subset of jobs that are unsuitable for many parents and carers.
Furthermore, the proposal reinforces inaccurate perceptions among some of the business community that flexible working is a burden to be avoided if at all possible. I strongly believe that society as a whole shares with families a responsibility to support those with caring responsibilities. One way in which we express this collective commitment is through promoting the rights of parents and carers to work flexibly. Removing these protections for some workers sends a negative message about the value of flexible working rights, undermining the very real progress that has been made in this area in recent years.
As currently constructed, the proposed employee shareholder status is fundamentally flawed. It puts a price on employment rights that should never be up for sale and takes a step backwards in efforts to promote a more family-friendly employment culture. For these reasons, I hope your Lordships will support this amendment.
Lord King of Bridgwater
My Lords, I am delighted to follow my own Bishop, who represents a city in which for a considerable number of years I had the privilege to work in industry and to have considerable responsibilities for employment and factory management. I have found this experience extremely valuable in addressing some of the issues that are before your Lordships’ House.
As my noble friend may know, and as the noble Lord, Lord McKenzie, will know, I was very robust yesterday in supporting the Government’s main programme to restore our economic strength. Today, however, I have to say that I regret the approach which the Government are taking. I am a very strong supporter of employee share ownership. Indeed, the great company in which I worked in Bristol was exactly like John Lewis, and every single employee enjoyed substantial bonus arrangements at the end of the year in a profit share. It is a valuable way of building up employee relations throughout any workplace.
I recognise the real challenges for employers at the current time, the complexity of legislation as it has increased and the need to try to make sure that the legislation that we pass, often with the best of intentions, does not become a substantial block to employment. For example, I welcome the fact that the exemption period for the unfair dismissal arrangements has been changed from one year to two years. However, that is where my support stops. My noble friend will know my views on this because I made them very clear to him. I express my appreciation for the very courteous and diligent way in which he sought to respond to a number of the points that I and others have made. I am sorry, for reasons which I will give, that the Government have got us into this position.
I think that it was Field Marshal Lord Alanbrooke who said that Winston Churchill used to have some wonderful ideas and some very stupid ones as well, and that his job was to determine which was which and make sure that the former were pursued and the latter quickly dropped. When I had some responsibility for the reform of employment law under the noble Baroness, Lady Thatcher, a number of people came to me who fitted exactly into that category of having some very good ideas and some pretty stupid ones as well, and one had to try to distinguish between them.
As soon as I heard the announcement of this proposal and of the brief period of consultation which would take place on it—and I understand that 92% of those who responded to the consultation were against the proposal—I carried out my own consultation. I have not found anybody yet who is in favour of the proposal or who says that they think that they will use the provision. I accept that the noble Lord, Lord Flight, has a good point, because he has huge experience of the City of London. I can see that very bright people, anxious to be successful and to enjoy good financial reward, and who are confident in their own judgment, might be prepared to embark on this course. However, if one then looks at the generality of SMEs and at the range of industry and employees up and down the country, one sees that the balance is completely wrong.
The power is with the employer at a time when many young people are finding it hard to get jobs. In no way is it a fair balance to say, “You have an impartial opportunity to decide”. I just wonder what will happen to the poor job applicant who, when he is told what the terms are, says, “I will now go and consult my adviser”. In relation to the earlier amendment we discussed the complexity of the tax arrangements which might apply and the complexity around the type of stock being offered—whether it is stock that cannot subsequently be sold. Given the overall complexity of this, is it a fair arrangement that an applicant for a job can be told that he can either take the job on this basis or not take it? I know exactly what the employer will say—“Well, do you want the job or don’t you?”. With a queue of 25 waiting outside, nobody can be happy.
I am trying to say as forcefully as I can that I am a strong supporter of the Government. I hate standing up here in the presence of all your Lordships to criticise something, but I have a greater duty to the Government—to prevent them going down a track which would lead to some really unhappy consequences. The opportunity provided by Clause 27 could be used by some very dubious employers indeed, and a large number of their employees could be deprived of their employment rights. If that happens there will be a feast for lawyers. With the greatest of respect to the noble Lord, Lord Pannick, he will do himself out of some work if this clause is omitted, because lawyers would have a field day.
With the opprobrium that could return to the Government as a result of this proposal, my duty is to give to my noble friend and the Government the best advice that I can from my own experience. I cannot support this clause. It is not at all the right way to go forward. I strongly support any sensible measures to help employers, and I welcome and congratulate the Government on the significant increase in private sector employment, but I say to them: do not pursue this route; it is the wrong way to go.
The Earl of Erroll
My Lords, I will make a couple of quick points on this. I keep hearing this tale about how power lies with the employers. Noble Lords talk about large companies that have expensive and well staffed HR departments and lawyers who work on this full time. I am afraid that the SME world that I live in a lot of the time is not like that. There, you cannot afford it. When you employ one, two, three, four or even up to 25 people, you cannot afford expensive HR advice every time you twitch, move, open your mouth or anything. That is what we have got down to because people say that the power lies with the employer. It does not.
We are seeing more and more vexatious demands over discrimination. In employment law, cases of sex, race, disability and age discrimination immediately mean unlimited liability. That means that your house and everything goes. If you are not a company—you may be a sole trader as a small employer—you will lose everything and be out in the street. Everything will be taken from you. If you incorporate, you are now told you are doing it for tax avoidance or evasion purposes and the press have a go at you for that instead. So in what way are you supposed to protect yourself?
The power may lie with the large employers. I do not know. I am not in that rich and rarefied world of some of the Silks who sit here and can afford that. As a small businessman I, and people like me, cannot afford the noble Lord, Lord Pannick. It would be wonderful if we could because we might get some protection as employers. For once, he might not represent the employee. I fear that it would normally be the other way round and we know who would win when someone was confronted with his incisive way of thinking.
All I want to tell noble Lords is that the world is not how some people see it. There are everyday problems out there and they limit employment. At the moment, half the people in the country are employed by microbusinesses and small and medium-sized enterprises of up to 250 people—there are very few in the bracket above 25 to 40 and below 250. Those are the people who need protection from a lot of this and we are not giving that in employment law as it stands today. Whatever noble Lords say, it is not there.
The charity world is another case. I know a charity that needed to rejig some things and wanted to bring in someone with greater expertise. It therefore needed another someone to move on to something else. It thought that it had reached a compromise agreement with him but then this chap did not sign it. When it came to the point of the tenth or eleventh month, when the charity thought it was all about to happen, he said, “I have not signed it yet and I have just gone to see some lawyers”. He is now trying to plead all the discriminations. I cannot see how he can, and nor can anyone else, but the cost of fighting that will be phenomenal. The fear of everyone, particularly the trustees of the charity—who are terrified—is their exposed position if he wins because the case can be proceeded against them. That is the bit that noble Lords forget about. They live in a dream world where we have a fair legal system, tribunals think fairly and lawyers always act in the best interests of law and not of these people. It is not like that. Therefore, I would like to see Clause 27 come in so that at least some people might negotiate a different arrangement. It is there for small businesses not large ones.
Lord Forsyth of Drumlean
The noble Earl made a speech about employment protection being excessive. I am not sure I understand how Clause 27 would alter any of the things that he complained about, with the one exception of the request for flexible working, unfair dismissal and redundancy payments. All the issues that he referred to would still apply if Clause 27 went ahead.
The Earl of Erroll
Even better. Passing it does not matter then, but at least it would send the right signal and some people may relax. If, as the noble Lord says, it will not change the unfair dismissals process, we can all proceed happy that that continues. Why object? At the moment, I know that the law is biased in favour of the employee, not the other way round. With that, I will sit down. I would love to see other things tried. At the SME end, we need signals sent by the Government, and this is one.
Lord Lea of Crondall
My Lords, I think that it is fair to say that the noble Lord, Lord King of Bridgwater, has some of the best political antennae in the business. I therefore think that we can look forward with some interest to the response of the noble Viscount, Lord Younger of Leckie. In debate in Committee, precisely the proposition made by the noble Lord, Lord King—that in effect people could say, “You can only get this job if you sign up to the scheme”—was made. The Minister said:
“I have not seen the guidance”—
the 3,000-page guidance—
“but I do not believe that it will say that”.—[Official Report, 6/2/13; col. 289.]
Two questions arise. First, can the Minister tell us definitively this afternoon, before we vote, whether the noble Lords, Lord King of Bridgwater and Lord Pannick, are correct or incorrect: yes or no? I will not detain the House, but what baffles me, picking up the point made by the right reverend Prelate the Bishop of Bristol, is how on earth the Government got the idea that this was convincingly presentable as part of the moral platform for modernising capitalism. As I think that the right reverend Prelate said, straight out of the Bible we have the precept, which is probably in the Koran as well, that you do not sell your birthright for a mess of pottage—that was Esau, I recall. Let me dub this Esau’s clause. It is incumbent on the Minister to give us a brief reply on that question.
Lord Forsyth of Drumlean
My Lords, I think that this is a positively dreadful clause. Perhaps I should declare three interests as a former Minister of Employment, as chairman of a start-up run by my daughter and as someone who has set up a number of businesses in the past. I could not believe the clause when I read it. It seemed to involve two really good things. I have much sympathy with what the noble Earl had to say about the burdens placed on businesses and the costs of going to an employment tribunal, but that is an argument about the extent to which employment protection legislation should apply and the costs associated with sorting out whether there has been an injustice to employees.
Employee share ownership is a very desirable thing up to a point. It can go too far if your salary and your savings are tied up in the shares of the company that is your employer but, as a general principle, giving people a stake or encouraging people to take a stake in the business is part of being a good and successful employer. I very much agree with what my noble friend Lady Brinton had to say about creating a culture in a company where people can feel part of a team and motivated. The idea in this clause has all the trappings of something that was thought up by someone in the bath, taking these two ideas together and believing that they made for a great scheme. In fact, it is damaging to both. I do not propose to reiterate the careful and precise arguments that the noble Lord, Lord Pannick, made in moving this amendment, which I support and which I will vote for if he chooses to divide the House on it.
Lord Morris of Handsworth
My Lords, I rise to support the amendment removing Clause 27. Let me make it absolutely clear that I am a passionate believer in—and advocate of—the stakeholding society, the stakeholding community and, of course, the stakeholding workplace. Applied to the workplace, the stakeholder principle can deliver workplace harmony, increase productivity and change the culture. I want to see all British workers benefit from the success of their companies, but instead of a few shares that may benefit only a few who have given up their rights, why can we not have a more imaginative approach, for example a profit-sharing scheme through which everyone can benefit from the prosperity of their company while maintaining their rights?
I very much regret that at this critical point in our social and economic history we are still having a debate about the disempowerment of British workers. Frankly, Clause 27 does nothing to increase productivity, improve the quality of what we do or, above all, address issues around investment, research, plant and equipment, people and education. What is needed in the workplace is good industrial relations. Indeed, someone should tell the Chancellor that you cannot build a world-class economy by creating first-class and second-class workers. Under these proposals we would have two groups of workers: workers with rights but no shares, and workers with shares but no rights. What about those who work in the public sector: nurses, doctors, those who sweep our streets or teach our children? Where is their reward for good industrial relations? Where there is harmony in the workplace, Clause 27 is guaranteed to bring strife.
When will the Government understand that some things are not for sale? Workers’ rights are not for sale. They cannot be traded. Dignity at work is not for sale and cannot be traded. The fight against injustice is not for sale and cannot be traded. Clearly, the Government do not understand that there are some things that money cannot buy and that shares cannot put right: dignity at work, self-esteem and fundamental human rights. Clause 27 strikes at the very heart of these principles, which this nation holds so dear. It is sad that the Bill will do nothing to make the workplace more harmonious or productive. Indeed, Clause 27 undermines workplace harmony and I hope that the House will oppose it.
Lord Vinson
It is a privilege to follow such an impassioned speech, as well as the extremely logical speech of the noble Lord, Lord King of Bridgwater. I have spent a lifetime promoting wider share ownership, and was for 10 years chairman of the Industrial Co-partnership Association.
All the points that show this clause to be madness have been made. It is extraordinary, in view of the very sensible criticisms in Committee, that the Government have proceeded with this and have seemed to ignore every single comment that this House, with its great qualifications in this area, has put forward. I wonder who is on the receiving end of our help in trying to forge better legislation.
The noble Lord, Lord Flight, was perfectly right to say that legislation to safeguard employee rights has reached the point where it is now preventing jobs from being created. Far from protecting jobs, it has reached the point of job destruction. The right reverend Prelate raised the point about flexible working. Try running a small business, nursing home or anything you care to think of with everybody asking for flexitime. Who mans the ship? It is important that you have core staff working through, to more or less hold the thing together. Of course, there is a nice element of human relationships in small businesses, and they go out of their way to try to meet employee needs in that direction, but pretending that you can bring in a level of compulsion on flexible working would only be done by somebody who has never actually experienced the first-hand difficulties of a running small business.
In Committee I made the point, which has been cited today, that to encourage wider share ownership is good. To recognise that employee protection has possibly been overdone in a number of instances is also right. However, to muddle the two together, to make a quid pro quo in this way, strikes at the very heart of the trust and sense of common purpose that all businesses are trying to build up. Therefore, this clause must be resisted on all fronts.
Lord O'Donnell
My Lords, I support the amendment. On this Budget day, it behoves us all to think about how we stimulate growth. This particular clause would actually be very harmful to growth; I agree in particular with what the noble Lord, Lord Forsyth, and others said.
When I was in the Civil Service, the Government set up the Red Tape Challenge initiative. That was really important, and there is a second round of that in the Budget today. It is hugely important that we tackle the issues that are holding businesses back, but I am not sure that this proposal emerged from the Red Tape Challenge or that businesses came forward with it.
How does the proposal fit with the Government’s policy of pushing mutuals, which I strongly support? There is a technical point as well: what we economists call adverse selection. If an employer is offering this, they are probably the kind of employer that you do not want to go near. If an employee accepts it, it is probably because they do not really understand what they are doing. On those grounds, it is bad.
I also take the point of the right reverend Prelate and the noble Lord, Lord Morris, about the moral case. I expected to hear the biblical reference: we know that in the old days the price of slavery was 20 or 30 pieces of silver. Is it now £2,000?
Baroness Wheatcroft
My Lords, many noble Lords today have explained that this is not the way to get the workplace flexibility that we need, and I agree. This clause purports to construct a new class of employee shareholder, but there are already 3.5 million people who believe themselves to be employee shareholders, in more than 5,000 companies. It threatens to give the wrong idea of what employee ownership is all about.
Employee share ownership brings many good things, such as lower absenteeism, staff turnover and higher productivity. The Deputy Prime Minister is a fan. He is so enthusiastic about this concept that in January last year, in the City, he suggested that perhaps employee ownership was such a good thing that the Government should consider giving employees the right to ask for shares in their business. We seem to have turned that round in the most extraordinary way. I cannot believe that he envisaged a scheme whereby employees would have to give up their rights in order to become shareholders.
This proposal troubles me, as it did in Committee, because I fear that it will bring out the worst in business, and not the best. We have heard about so many things that are wrong with this clause. The original government consultation was responded to by 184 organisations. Only three said that they might consider adopting it. However, being told that probably very few will take it up is hardly a recommendation.
There are some supporters. The Institute of Directors has now come out in favour of the proposal, although when I asked if they had consulted their members, the answer was no. The chief executive of the British Venture Capital Association has also come out in favour. He says that in every start-up that he has ever been involved with, employees have been given shares. I am sure he is right, and I am sure that it has worked. Clause 27 might be more acceptable—I doubt it, but it might—if it were restricted to start-ups, where the rate of failure is obviously clear, and where the potential of gain, if one were lucky enough to be employed by Google or the like, would be an attractive alternative. However, the scheme is not restricted to start-ups or even small companies. Instead, it will appeal to those middle-sized and larger businesses that may see it as a way of becoming part of what is already being referred to as the “Gradgrind tendency”.
Let us imagine a group of employees who have sold their rights—for a mess of pottage, as we have heard—and another group who have not. The company falls on hard times and has to declare redundancies. Who will be first in the line for redundancy? I would hazard a guess that it will be those who have shown the most commitment to the business by becoming employee shareholders under the new scheme. That is the sort of perverse effect that we are likely to see if the clause goes through.
This legislation risks giving employee ownership a very bad name. I would not advocate the idea, suggested by the Deputy Prime Minister, that we should give employees the right to request shares in their company. However, to give those in larger companies the option of taking shares and giving up their right to request training seems extraordinarily perverse at a time when we need the best-skilled workforce we can get.
There are so many reasons why this clause should be opposed today. Much as it grieves me to speak against my Government, and much as I see many things in the Budget that should be applauded, this would end in tears.
Lord Flight
My Lords, as I suggested in our debate on the previous amendment, I accept that some improvements could be made to this clause, and it is unlikely that its take-up will be substantial if it goes ahead as it is. I also certainly agree with the principle that it has to be voluntary. If it was the case—I am not sure that it is, despite the advice of the noble Lord, Lord Pannick—that people lost their jobseeker’s allowance if they did not accept employment, I think that is wrong. But this House should listen a little more to the noble Earl, Lord Erroll, and those who really are engaged at the SME level. It is very interesting that nearly all those opposed to this clause had nothing to comment on the extent to which employment law has clearly become discouraging of employment and has, in a sense, gone too far in the protective direction, generating massive income for lawyers, with too many vexatious claims. This clause is, in some senses, no more than a perhaps not totally well thought out attempt at an experiment to see what happens and whether we can agree, with benefits to the employee, to have much less demanding employment law.
I am a little concerned that those opposing this Bill are, to me, today’s establishment from all sides of the House, and not the people at the coal face who are trying to promote small businesses. The clause could be polished up—I hope that it will be—before it is enacted, and some things may be wrong, but at least in an important way it accepts the point that many others do not seem to accept, which is that employment law in this country, particularly in the world in which we live today, is costing us jobs and prosperity, and something needs to be done about it.
Lord Adonis
My Lords, in my eight years in the House I have never witnessed a government policy with less support not only in Parliament but within the Government themselves. We greatly admire the stoicism of the noble Viscount, who will read out his brief in a moment, but it is no secret that his own Secretary of State, Vince Cable, does not support this clause. This is what he said when he vetoed the original Beecroft plan to scrap unfair dismissal rights:
“Britain has already got a very flexible, co-operative labour force. We don’t need to scare the wits out of workers with threats to dismiss them. It’s completely the wrong approach”.
Most Conservative and Lib Dem Back-Benchers clearly think that it is the wrong approach, too. Only two government Back-Benchers have supported this clause at any stage in our debates, and they have been not only outnumbered on their own Benches but massively outgunned, not least by the powerful speeches made this afternoon by the noble Baroness, Lady Brinton, the noble Lords, Lord Forsyth, Lord King, and Lord Vinson, and the noble Baroness, Lady Wheatcroft.
To remove this clause today would be an act of mercy to the Government, let alone to the employees adversely affected by it. Justin King, the chief executive of Sainsbury’s, who was on the Prime Minister’s business advisory group, said that trading basic employment rights for shares was,
“not what we should be doing”.
He went on to say:
“What do you think the population at large will think of businesses that want to trade employment rights for money? … Our agenda … should be making employing people easier and less costly”.
That is absolutely right.
We are talking here about the right to statutory redundancy pay, the right not to be dismissed unfairly, the right for parents and other carers to request flexible working, and the right to request training. The idea that depriving employees of these basic rights is somehow going to boost growth is not supported by a single employer I have met, let alone employee. Out of the 219 responses to the government consultation, only five welcomed the idea. The noble Lord, Lord Deben, summed up the mood of the business community and the House when he told us in Committee:
“I cannot imagine any circumstances whatever in which this would be of any use to any business that I have ever come across in my entire life”.—[Official Report, 6/2/13; col. 293.]
He might have added that protection against unfair dismissal and the restriction on contracting out from basic employment rights were introduced by Conservative Governments in the 1970s and 1980s.
Throughout our debates, I have emphasised that we on this side strongly support wider employee share ownership, and we backed proposals to that effect in the Nuttall report, published only eight months ago. However, that is entirely different from trading shares for basic rights in what is generally an unequal employment relationship, which is the very reason why employment rights exist in the first place and why they have been built up by Governments of all parties over many decades.
I stress that the Nuttall review did not so much as mention trading shares for rights, and the Minister has been quite unable to explain to the House why, if this proposal is such a good idea, it was not even considered, let alone endorsed, by the most comprehensive review of employee share ownership in recent years. Meanwhile, the Employee Ownership Association has said:
“There is no need to dilute the rights of workers in order to grow employee ownership”.
However, let me put these arguments of principle aside for a moment. The policy is internally flawed in two key respects. First, its key rationale is that it will promote growth by reducing employment law red tape for companies. In fact, as the Law Society argues cogently, it will create more red tape, not less, because it is bound to lead to costly litigation. In particular, it will lead to a rash of claims of discrimination because discrimination will be the only avenue for aggrieved employees to pursue once they have no rights to redundancy pay or unfair dismissal.
The second respect in which this proposal is internally flawed is that the Government claim—the noble Viscount repeated the claim in the previous debate—that this is an entirely voluntary new employment status, with no coercion on anyone to accept it. The problem is that on any fair assessment this claim is simply not true. There is no requirement in the Bill for employers to provide independent advice to those being offered these shares-for-rights jobs. It is therefore likely that individuals, particularly the more vulnerable and low paid, will not be properly aware, if they are aware at all, of the rights they are forgoing in return for shares worth as little as £2,000 at the time they are issued—shares that could easily be worthless by the time they come to sell them. That is why, in Committee, we supported amendments requiring independent advice to be made available before individuals sign shares-for-rights contracts, but the Government refused to accept those amendments. This being the case, Clause 27 stands condemned by the Equality and Human Rights Commission, which says in its advice to your Lordships:
“A failure to include effective safeguards in the proposals would make it strongly arguable that the proposals indirectly discriminate against those less likely to be able to make a properly informed or truly voluntary decision, for example, people whose first language is not English, those with learning disabilities, or young workers”.
Worse still is the position of individuals on unemployment benefits, who far from being given a voluntary choice about accepting no-rights jobs are being told by the Government that they stand to lose their income if they do not do so. In order to make it look as if they were sympathetic to these concerns, Ministers said that they would amend the guidance to DWP decision-makers in cases of appeal against loss of benefits so that decisions were taken on a reasonable basis. Despite months of badgering the noble Viscount and his department, we did not even see this revised DWP guidance until last week. I am very grateful to him for finally making it available to us. Now that we have it, I can see why the noble Viscount thought concealment the better part of valour, as the noble Lord, Lord Pannick, said so eloquently, for it states in terms:
“Employee shareholder vacancies should on the whole be treated in the same way as any other vacancy”.
In other words, if the jobseeker does not take a no-rights job, they are likely to lose their benefits. I cannot see what is voluntary about that transaction.
As Paul Callaghan, a partner of the respected legal firm, Taylor Wessing, puts it,
“shares-for-rights contracts will be optional to the extent that eating and drinking are optional”.
As if all I have said so far is not enough, there is another major and completely unacceptable aspect of this shares-for-rights proposal. The independent Office for Budget Responsibility has reported that it opens up a £1 billion tax avoidance loophole. During Committee, the noble Baroness, Lady Brinton, quoted the coalition agreement, which says that the Government will,
“make every effort to tackle tax avoidance”—
and,
“will seek ways of taxing non-business capital gains at rates similar or close to those applied to income”,
yet Clause 27 does precisely the opposite.
In his letter to me last week, the Minister confirmed that the first £50,000 of shares given to an employee shareholder will be free from capital gains tax when they are sold. It is for this reason that the Office for Budget Responsibility estimates that the scheme will cost the Exchequer £1 billion a year when it is mature. At this point, we enter the world of the surreal.
Lord Flight
I cannot see the argument that making shares free from capital gains tax is an act of tax avoidance or improper tax treatment, when one considers the other side of the coin, which is that a valuable employment allowance is being given up. It is not dissimilar to other situations where there are tax incentives to invest.
Lord Adonis
I am sorry that the noble Lord has difficulty in seeing the argument. This is creating a completely new branch of the tax avoidance industry. If that is not obvious, not many obvious statements have been made in the House this afternoon.
The Earl of Erroll
Excuse me, but I cannot let the noble Lord get away with that. It is the same as any other employee shareholding scheme; to suggest that it will create new tax avoidance, when the Government are trying to introduce tax-efficient schemes for investment purposes, is hammering people ridiculously.
Lord Adonis
My Lords, a new scheme is being introduced by this Bill. It is not an existing scheme. If that were the case, we would not be here debating it. It is the new opportunities that the scheme creates for efficient tax planning, if I may put it that way, that has led the Office for Budget Responsibility to say that it will lead to the Treasury forgoing up to £1 billion.
At this point, we enter the world of the surreal because we are debating a tax loophole that will add £1 billion a year to the deficit. The proposals are from a Chancellor of the Exchequer who tells us day in and day out—indeed, only a few hours ago in the Budget—that reducing the deficit is the nation’s overriding priority.
Lord Adonis
My Lords, I have given away twice to the noble Lord. He has had plenty of opportunity to make his case.
Lord Ahmad of Wimbledon
My Lords, we are on Report. Only points of clarification should be sought, and I ask the House to respect the rules.
Lord Adonis
I am happy to give way to the noble Lord because every time he intervenes he maximises the vote in favour of the amendment.
Lord Flight
The noble Lord clarified my previous point that the scheme was a new scheme that did not create tax avoidance. If the scheme did not exist, there would be no tax revenue at all. The Treasury will therefore not lose tax revenue as a result of the tax arrangements; it will merely not get as much as it might otherwise get.
Lord Adonis
My Lords, who knows to what the funds would have been devoted before the scheme was created? That is the answer to the point about whether the scheme leads to more efficient tax planning of a kind that leads to real income being forgone, not just additional income that might be generated from these contracts.
To conclude, by removing this clause we will be saving the Chancellor from himself; we will be saving the Government from themselves; we will be doing our basic duty as a revising Chamber; but, more importantly than any of this, we will be protecting decent hard-working people from the unfairness and humiliation of being stripped of basic rights at work. Our duty is clear.
Lord Razzall
My Lords, I was hoping to precede the noble Lord, Lord Adonis, but he was too far out of his trap, and I am sure that he wanted to speak immediately before the Minister. It is not often that we have the perils of coalition government being laid as bare as it has been in the House this afternoon. It is particularly refreshing to see that the strains in the coalition are not just among the Liberal Democrats. I sometimes wish that the noble Lord, Lord Strathclyde, had been in his place this afternoon to see that it is not only the Liberal Democrats who cause problems within the coalition discussions.
Lord Ahmad of Wimbledon
My Lords, I have already indicated that there are specific rules on Report that need to be respected. I think it is the will of the House that we should now hear from the Minister.
Viscount Younger of Leckie
My Lords, we have discussed the employee shareholder clause at length, and some Members of this House in Committee questioned the merits of establishing a new employment status. Several noble Lords raised concerns about who will use the new status, the quality of the guidance, to whom it would apply and when it would be available. Concerns were also raised about income tax and jobseeker’s allowance as it applies to those who are seeking employee shareholder status. I am grateful to noble Lords from all sides of the House for their contribution to the debate, and I want to take some time to address some of the main concerns about the new status—and it is a new status. I acknowledge the negative comments that have arisen today, but it is the Government’s belief that there is demand for a new employment status of employee shareholder, that it will be used, that it will benefit employers and individuals, and that, in turn, it will help the economy to grow.
We believe that the two existing employment statuses of worker and employee do not offer enough flexibility to employers or offer real opportunities for individuals who want to share the rewards of a growing business. There is support for this new employment status, and we have evidence of that from the Institute of Directors, the British Venture Capital Association, the Federation of Small Businesses, Stuart Rose and, at the other end of the scale, from the heads of many small businesses, including Will Butler-Adams, the chief executive of Brompton Bicycle Ltd, and Jamie Murray Wells from Glasses Direct. I could go on.
By creating a new employment status with fewer rights than employees have but more rights than workers have, we are providing a new contract type to give employers more flexibility and options in how they structure their workforce. This new employment status will support this Government’s ambition of securing a strong UK labour market where individuals can have greater and potentially more rewarding access to the work they want. Employers can secure the labour that they need at the right time in order to capture new markets and sell their products in an increasingly competitive global environment.
This new status is most likely to be attractive to young and growing companies, which will be able to share potential future growth with their staff. The employee shareholder status may tip the balance in favour of these types of companies as they seek to attract high-calibre people. This is because companies will be able to offer shares that will not be subject to capital gains tax, as we have heard today, and it is a radically new approach to taking people on.
We should be developing and supporting innovative ideas that give employers new tools to manage their workforce effectively and to succeed. This new employment status is one such tool and we should give employers the option of using it. Indeed, with the interest expressed, it would be an opportunity missed to deny them the use of this novel tool.
When we think of people working, we automatically have in mind employees with substantial employment rights. However, we must not make such assumptions. Not all individuals in the labour market are employees. Some are sole traders, others are self-employed and some are defined as workers. These individuals do not have a whole host of employment rights, as I outlined clearly in Committee.
Employee shareholders will have more employment rights than workers and they will own thousands of pounds-worth of shares in the company or parent company for which they work. Because these shares are exempt from capital gains tax, employee shareholders may be in an advantageous position. Of course, the risk remains that the shares held may decrease in value, emphasising the greater risk and reward-sharing that this employment status represents. I think that those points on the negative side have been made pretty clearly today.
I now turn to how the new status will work. We must all remember that before an individual can be considered to be an employee shareholder, paragraphs (a), (b) and (c) of new Section 205A(1) introduced in Clause 27 stipulate that three criteria must be fulfilled. This means that if an individual does not agree to be an employee shareholder, they cannot become one; it means that if an individual does not receive at least £2,000-worth of shares, they will not be an employee shareholder; and it means that if the company tries to charge for the shares or does not give fully paid up shares again, the individual will not be an employee shareholder. If the individual signs what looks like an employee shareholder contract without all three qualifying criteria being fulfilled and still works for the company, that person is likely to be an employee and will be entitled to all the employment rights associated with that status.
The new status confers more advantages than beneficial tax treatment alone. I intend to give a much more positive picture than that given by several noble Lords today, including my noble friend Lord Forsyth. Let us consider what this means for the employer of an employee shareholder. An employee shareholder is more likely to generate ideas for growing the company and will have a greater incentive constantly to strive to improve a product, effect a sale or streamline a system. Because the employer knows that the employee shareholder is an owner, the employee shareholder is more likely to be listened to. The employee shareholder status is more likely to encourage co-operation and cohesion between the employer and employee shareholder as their personal goals are more aligned. I listened carefully to my noble friend Lord King and was pleased that he conceded that this could suit certain companies and certain employees, which is precisely what we are saying.
Our companies are competing in a global race to increase their competitiveness and market share, and to create wealth. In turn, this will create new job opportunities. Employee shareholder status presents our companies with an additional option to employ people who will invest in the long-term success of the company, lowering labour turnover and associated costs.
Let me turn now to guidance. During our debate in Committee, guidance for employee shareholders was discussed at length. As promised, a full pack of draft guidance was laid in the Library of the House on 14 March. This has given your Lordships the opportunity to see what the employee shareholder guidance for individuals, companies, DWP jobcentre advisers and decision-makers will look like. It is something that we promised. It is in draft form. It will continue to be drafted. The plan is that in September it will be in its final form. I welcome comments to improve the guidance on all fronts.
We have designed the guidance in collaboration with other government departments, such as HMRC and DWP, and have worked hard to keep it as simple as possible so that it is easily understood by its target audience. Noble Lords will remember that in Committee I referred to a much larger document of 3,000 pages. This has produced a much more simple approach. The guidance is not final. We have tested the guidance with jobcentre advisers and are continuing to test it with the Employment Law Review Business Challenge Panel. Where needed, we will refine the guidance before the new status is used in September this year.
The draft guidance comprises three parts. The first part is guidance for individuals that will make it clear for people considering employee shareholder jobs what employment rights are associated with these jobs, the risks and rewards of being a shareholder and other factors that they may wish to consider before accepting, or otherwise, an employee shareholder role. Secondly, guidance for companies will help them understand the employee shareholder status, what it means for them and how they can use the status within their workforce. The third part is guidance for DWP Jobcentre Plus advisers and decision-makers to ensure that they understand the new employment status.
People in receipt of jobseeker’s allowance will be expected to consider employee shareholder jobs if they match the criteria agreed in their jobseeker’s agreement. This agreement would have been discussed and agreed with a Jobcentre Plus adviser on first attending a jobcentre and would set out the jobseeker’s job goals, availability for work, any agreed restrictions and what steps they will take to look for work. I will return to that in a moment.
I should like to pick up on a number of questions. There were quite a few and I may not be able to answer them all. The noble Lord, Lord Pannick, stated that no evidence was provided about the number of companies that might be interested. I believe he will know that last year the Government published an impact assessment. The background to how we came to the figure of 6,000 businesses is that there are a large number of businesses within the UK. In 2012 figures, it is estimated that there are about 4.8 million, not all of which will be able to use the employee shareholder status, as only companies can issue or allot shares. That is essential for the employee shareholder status to operate.
Just over 55% of all businesses in the UK are registered companies: that is, around 2.7 million. However, not all are estimated to have employees beyond the self-employed owner-manager of the company or a single employee director. This figure is probably less than 1 million. In 2010-11, around 9,000 companies were operating any form of approved tax-advantage share scheme in the UK. There will be more than this operating non-tax-advantage share schemes. Our approximate estimate, therefore, is that around 6,000 companies, as I said in Committee, may use the employee shareholder status, although I acknowledge that it could be more or less. Employee shareholders are a new option for companies, which they can choose to use when it suits their circumstances. It is not so much about whether the figure is 6,000, 4,000 or 7,000; the point is that the opportunity is there for companies to pick this up, or not, as is their wish.
Baroness Brinton
The guidance notes that we saw were quite explicit that the prospective employee shareholder applicant should be treated exactly the same as any other applicant, with the one exception of their financial resources being such that they could not pay the tax bill right at the start. If that is the case, the argument made by the noble Lord, Lord Pannick, myself and others is that, first, that penalises those who are concerned about losing their rights. Secondly—and this is the core question—is it voluntary? The Minister has emphasised right the way through the debates on the Bill that the scheme is utterly voluntary.
Viscount Younger of Leckie
It is indeed voluntary, but I would like to clarify that when it comes to a jobseeker seeking a job, they are treated in exactly the same way as other statuses. That is because we believe it is important to move jobseekers into work as quickly as possible, just like other statuses. Periods of unemployment, as we know, can have a most damaging effect on individuals’ long-term employment prospects and indeed earnings. That is why the jobseeker allowance regime focuses on moving claimants into any work as quickly as possible. This remains the case for the employee shareholder should they be mandated and reach the point when they are offered this particular position. We think it is right that they should not be treated any differently in this particular respect.
Lord Adonis
I am having some difficulty following the Minister's argument. He says that the acceptance of these posts is indeed voluntary, even though the individual in question stands to lose a substantial part or the entirety of their income if they do not accept the post. Could he explain to the House in what meaningful sense that is voluntary?
Viscount Younger of Leckie
It is voluntary in that the individual can decide whether he or she wants to take this particular role. If it has got to the point where they are mandated and there is an issue as to whether they take it or not, there are processes in place to work out how to go forward. That is the process that the noble Lord, Lord Adonis, will know is set as part of the guidance. The decision makers and the jobcentres know how to deal with it on a case-by-case basis.
Lord Adonis
This is a really crucial point in our deliberations. The guidance that the Minister circulated to your Lordships says:
“Employee Shareholder vacancies should be treated in the same way as any other vacancy. If a claimant … fails to apply for or accept if offered an Employee Shareholder vacancy … the DM”—
the decision maker—
“will consider a higher-level sanction in the normal way”.
It could not be clearer that those not accepting these posts will be subject to sanctions. Therefore, in any meaningful sense, their decision is not a voluntary one.
Viscount Younger of Leckie
I can only reiterate that employee shareholder status is being treated in the same way, and that if in a specific case an issue arises, that is down to the discussions and decisions made at the local level in the jobcentres and with the employees who are seeking work. It is not just work for an employee shareholder as it may be that they are looking at a number of other positions at the same time.
The noble Lord, Lord Pannick, asked why we do not compel legal advice such as compromise agreements. Again, in the same bracket, we would say that this is to do with individuals looking at and accepting employment; it is not to do with departure from employment. We do not wish to treat the entry into employment in a different way. That is where we are.
The right reverend Prelate the Bishop of Bristol raised a number of points concerning whether this scheme is morally wrong. I think he used the expression “the thin end of the wedge” and that it was the beginning of the end for employment rights. I would reiterate that this is a new employment status which offers a different set of rights and mandatory share ownership. The status is not compulsory for companies to use and it will be suitable only for those companies that want to share ownership with their workforce. We must remember that employee shareholders will retain the majority of employment rights, including, for example, automatic unfair dismissal rights and the right to be paid the national minimum wage. As I said earlier, we have been consistent that the new status will not suit all people or all companies, but for those who choose to use it, the employee shareholder status offers more flexibility and allows greater risk and reward sharing between people and companies.
The right reverend Prelate also asked about flexible working. The statutory right to request flexible working creates a structure for conversations between employees and employers about changes to the ways of working that will be mutually beneficial. Employee shareholders will have a greater interest in the performance of their employer as it is linked to the value of their shares. We consider that employee shareholders are more likely to request flexible working if they think it will help them and the company, and do not need the statutory right to request. Further, employee shareholders can still make non-statutory requests for flexible working.
The Government want a labour market that works for employers and individuals. We want flexibility so that it is easy for people to find work that suits them and we want to help employers manage their staff more effectively so that they can focus on running and growing their businesses. We want to give individuals more chances to share in the growth agenda and to own shares in their employer. It is the Government’s belief that with this new status we are offering companies more choice and more flexibility. It is a new way of attracting high-calibre talent to growing companies. It may provide a boon to companies and improve UK competitiveness. This status offers individuals something new: employment with favourable tax treatment.
We all recognise that this may not suit everyone, and I have listened carefully to all the comments this afternoon. However, we should not deny people the opportunity to use this status or deny companies in the UK that are striving to grow and are looking for innovative and modern ways of taking people on. We want the House to embrace the opportunity and flexibility that this new status presents, and I would therefore ask the noble Lords, Lord Pannick and Lord Adonis, my noble friend Lady Brinton and the right reverend Prelate the Bishop of Bristol to withdraw the amendment.
Lord Pannick
My Lords, I thank the Minister for his comprehensive reply. I sympathise with him because I am sure it was not in his bathtub that this foolish idea was dreamt up. I am very sorry that the Government have not listened in particular to the noble Lords, Lord King of Bridgwater, Lord Forsyth of Drumlean and Lord Vinson, and to the noble Baroness, Lady Wheatcroft. Between them they have years of experience as employment Ministers and in business. Their views echo those expressed in Committee by the noble Lord, Lord Deben, with his business experience, and by many others. They are views that reflect the opinions around the House, not just on the Government Benches but on all sides, on the implications of this unwise proposal.
As your Lordships have heard, concern about Clause 27 is not a partisan issue. It is a question of the damaging effect that this clause will have on employment relationships, on industrial harmony and through the power it will confer on bad employers. Since the Government have declined to listen, it is time for noble Lords to put Clause 27 out of its misery. I wish to test the opinion of the House.
Baroness Hanham
“( ) Subsection (4) does not apply to an order under section 6(6).”
Baroness Hanham
Baroness Hanham
Enterprise and Regulatory Reform Bill
18:54 - Division on Amendment 7 - Ayes: 110 / Noes: 207 - Amendment 7 disagreed.
Baroness Anelay of St Johns
My Lords, it is at this moment on some Bills when I have a duty, as government Chief Whip, merely to give indication of the Queen’s consent. It is only a procedural matter before we go into the Bill.
I have it in command from Her Majesty the Queen to acquaint the House that Her Majesty, having been informed of the purpose of the Enterprise and Regulatory Reform Bill, has consented to place her prerogative and interest, so far as they are affected by the Bill, at the disposal of Parliament for the purposes of the Bill.
Clause 1 : The green purposes
Amendment 1
The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Viscount Younger of Leckie)
My Lords, the amendments in this group make consequential provisions on the clause that the House agreed on royal charters and make some minor and technical improvements. Following the Government’s acceptance of the amendment of the noble Lord, Lord Stevenson, earlier this week in relation to royal charters, we have brought forward a clause dealing with the extent of this provision. We have by that amendment limited the extent to England and Wales.
The Government have been clear that they respect the right of the Scottish Government and Northern Ireland Executive to consider how they wish to respond to the recommendations of the Leveson report. Only last week, the noble and learned Lord, Lord McCluskey, presented the report of his expert panel on how Lord Justice Leveson’s recommendations could potentially be implemented in Scotland. The body created by the royal charter would be capable of operating throughout the United Kingdom, including Scotland and Northern Ireland, should the devolved Administrations want it to. The Government have been clear that whether it does so is a matter for discussion with the Scottish Government and the Northern Ireland Executive. However, it is important that we observe the boundaries between our respective powers, and it is for this reason that the extent is limited to England and Wales. This is because the measures, were they to have UK-wide extent, would also prevent Scottish Ministers or Northern Ireland Ministers from exercising their royal prerogative to make recommendations to Her Majesty in Council in respect of these devolved matters. It is therefore an issue that should be discussed more fully with the devolved Administrations to allow them the opportunity to comment.
It is important to note that nothing in this clause prevents the charter from operating across the United Kingdom, if that is desired. If the Government are asked by the Scottish Government or Northern Ireland Executive to extend the provisions, we will consider doing so.
As the Prime Minister announced in the House of Commons on Monday, the Secretary of State for Culture, Media and Sport and the Advocate-General for Scotland will shortly have discussions with Scottish Ministers. Such discussions will also be held with Ministers of the Northern Ireland Executive. Those discussions will consider whether the extent of the new clause should be amended to go beyond England and Wales, during consideration of amendments in the other place. The amendments before us also amend the Long Title of the Bill to reflect inclusion of the new clause, and provide that the clause will come into effect on Royal Assent.
Amendments 1 and 2 are minor technical amendments relating to the UK Green Investment Bank which seek to improve the drafting of Part 1 of the Bill. Amendment 1 ensures that references to greenhouse gases throughout Part 1 of the Bill—not just in Clause 1(1), as previously—are given the same definition as in Section 92(1) of the Climate Change Act 2008. Amendment 2 clarifies that the activities referred to in Clause 5(2)(b) have the same meaning as those referred to Clause 5(2)(a).
Moving on to competition, Amendment 14 is a technical amendment to Schedule 4. It has two purposes. First, it will enable us to provide for the appointment to the CMA panel of individuals who have already served eight years on the Competition Commission panel but require temporary appointment to the CMA panel to see out an existing inquiry. Secondly, it will enable us to make clear that other Competition Commission panel members who are appointed to the CMA panel can subsequently be reappointed to the CMA panel to see out an inquiry which began when they were members of the Competition Commission panel. I beg to move.
Lord Stevenson of Balmacara
My Lords, I am grateful to the Minister for introducing these amendments. We are broadly happy with the majority of them. I have just a couple of points concerning the territorial issues he talked about in relation to the royal charter, which may have eluded me. I am sure that he will be able to put me right.
As I understand it, the royal charter will operate across the whole of the United Kingdom but the intention of government Amendment 12 is to restrict the effect of the entrenchment clause—which was passed in this House on Monday—to England and Wales. However, if it is subsequently decided that the measures should be enacted for Scotland and Northern Ireland, what are the Government’s intentions? I think the Minister said that he expected that these discussions would be concluded by the time we were in receipt of any comments that the House of Commons might want to make on the Bill. If my arithmetic is correct, that is only three or four weeks away so we are putting rather a tight timetable on it. In the unlikely event that these discussions continue beyond that date, can the Minister speculate on how it would be possible to amend the Bill once it has received Royal Assent, or does he have other plans that would allow us to take that forward?
My second point is a rather narrow one. We are dealing with royal charters and therefore the territories to which they apply. While Her Majesty has been gracious in allowing her prerogatives on this point to be surrendered to Parliament, what happens to other territories, such as the Channel Islands and the Isle of Man, where the royal charter will clearly have effect but the clause of the Bill will not run because it is limited to England and Wales specifically?
Viscount Younger of Leckie
I thank the noble Lord for those questions. It is anticipated that the discussions that are going on with the Scottish Government will be concluded within three weeks, or whatever the time period is. That is obviously not guaranteed but the talks are regarded as being urgent and are happening immediately. On what would happen if they were not concluded, it is a question of wait and see. I will certainly get back to the noble Lord with a reply. On the noble Lord’s second question concerning the extension of the royal charter to the Channel Islands, I will need to get back to him with a response.
Lord Whitty
“(5) Prior to the commencement, under section 98(3), of this section and Schedule 20, the Secretary of State shall publish and lay before both Houses of Parliament an updated impact assessment of the effect of the abolition of the Agricultural Wages Board on the agricultural economy and on the wages and conditions of those who work in that sector.”
Lord Whitty
My Lords, I make no apologies for returning to this subject. We have left the Agricultural Wages Board in a very difficult position. The substance of the matter was carried on 7 March and clearly the Government have the primary authority to abolish the board. In fact, they already had because it was in the Public Bodies Act. The difference is that the Public Bodies Act required a stringent and enhanced system of scrutiny to be followed before abolition could be implemented. We are now in the ludicrous position, after a very late amendment to the Bill, in which the only public body that is not subject to an enhanced scrutiny process—which this House insisted, after some very difficult and bitter debates, must apply to all public bodies—is the Agricultural Wages Board.
I am not sure if it is in order to cede the ground to the noble Baroness, Lady Gardner of Parkes. Clearly, her amendment preceded mine. I am getting a shake of the head from the Clerk at the Table. That is the procedure, I am afraid. I am sorry.
Baroness Gardner of Parkes
I thank the noble Lord for that. Unfortunately I had to wait for the lift and I got stuck getting here. Apparently there is no way we can go back to my amendments. Is that correct? Perhaps the Minister or someone else will answer. I had every intention—I had waited here all day specifically—to move these amendments.
Baroness Garden of Frognal
I am sorry to say to my noble friend that her amendments were called and not moved, so I am afraid that we have now moved on to Amendment 7.
Lord Whitty
My Lords, I apologise to the noble Baroness. We almost missed this amendment as well so I quite understand the hurry. This indicates the rigidity of our procedures because my original intention at Third Reading, given that we got a printed copy of the Bill that had the Agricultural Wages Board in it only yesterday, was to insist that an equivalent procedure be written into this Bill for dealing with the implementation of the abolition of the Agricultural Wages Board in the same way as that applied to every single other public body.
That is not in order for Third Reading and, obviously, I accept the advice of the clerks in these matters. I have therefore concentrated on a very narrow area which was not fully debated last time, although we touched on it in some detail. However, there was no amendment before us then that required a further economic assessment from the Government of the impact of the abolition of the Agricultural Wages Board.
The fact of the matter is that there was considerable confusion at the previous stage as to what the economic assessment was. The Government have not produced the kind of Explanatory Memorandum that is required under the Public Bodies Act, but there was a document called the “economic assessment”, which went with the rather curtailed consultation and clearly indicated that the main effect of this Bill would be a significant reduction in the aggregate income of agricultural workers by nearly £0.25 billion over the next 10 years. Those were the figures provided by Defra via the Minister and the impact assessment.
On the day that we last debated this matter, and having queried whether that was still the Government’s position, I received a letter from the Minister which said, “No, no, these figures were all got up”—I paraphrase slightly—“by the consultants”, and that the department did not believe a word of it. He said that the consultants had advised at the top end of the range, whereas the Government thought that the outcome would be at the bottom end of the range. That is not a very satisfactory position in any circumstances and it is certainly not satisfactory when we are abolishing a body which has existed for many years and is the only one in this cull of the quangos which specifically tries to protect the living standards of a group of rural workers.
In the debate that followed, all sorts of interpretations came on to the agenda. I tended to agree, because I am conventional sort of person, that what the department had told us was probably right. Therefore, I agreed with the statisticians who were advising Defra. The Minister had already indicated that he did not really agree with them; others of his supporters said various different things. Some, whom one might characterise, perhaps unfairly, as being of the landowning tendency, said that it would be all right because they already treated their chaps decently, which is fair enough; other people said that the international competitiveness of English agriculture—because the other parts of Britain do something different—was dependent on being able to cut wages. Some of those people were the very same people who argue rather the opposite when it comes to banking, but let us let that pass. Others—I think that the noble Lord, Lord Cavendish, was among them—argued that agricultural wages were excessive already and were greater than those of hotel workers. That seemed rather to prove my point, because the wages councils in the hotel and catering industries were abolished some years ago.
However, it was clear that there was no compatibility between the various interpretations of the best estimate of the outcome as compared with the Government’s own figures and as compared with the Minister’s position and my position. There are four or five different interpretations. That is not good enough.
I am therefore proposing a very modest amendment: the Government should come up with a new economic assessment before they trigger the commencement proceedings on this Bill. Surely everybody who spoke in that debate and everybody who has an interest in this area should be in favour of that, because we want a robust economic assessment. Whatever we may think about the abolition of the board and whatever opinion we may have about the need to raise, reduce or protect wages, we should get a better economic assessment before we do it. That is really all my amendment proposes.
It would have one other benefit for the Government: it would take a bit of time and it would be interesting to know what timetable the Government have in mind for the implementation of abolition. After all, discussions on this year’s round of wages have already started and would normally be for implementation in October. In effect, if the Government let that round go, the Agricultural Wages Board’s underpinning of wages would run until October 2014 at least.
The Government need a bit of time because there are a number of issues which do not relate to wages but are covered by the agricultural system. One of them is the situation relating to Wales, which wants a different outcome. The position on Wales is not resolved by the Government’s clauses as they now stand in the Bill, so they need a bit of time to sort out the Welsh situation. They also need to deal with the non-wage aspects of the agricultural wages order, in particular those aspects that deal with tied cottages for permanent workers and those that deal with adequate accommodation for migrant and seasonal workers. It is only the Agricultural Wages Board which provides that migrant seasonal workers are required to have one bed each rather than 20 of them sharing a six-berth caravan, as was the situation prior to it being regulated by the wages board. So those matters need sorting out. Some protection is needed in law or in regulation once the board goes.
I am doing the Government a favour by putting forward this amendment. The Minister has had a rough day so far, but I am offering him a way out here. So that we no longer argue about this—and subject to what the Commons say, because they have not seen this amendment yet—we need, before the Government implement this clause, a clear economic assessment which the House and another place can debate if necessary. That will also give the Government the time to sort out the other loose ends. I therefore assume that the Government will accept my amendment and that we can then move on and complete this Bill. I beg to move.
Earl Cathcart
My Lords, I farm in Norfolk. The noble Lord, Lord Whitty, argues his case well, as he always does. He calls for yet another impact assessment of the effect of the abolition of the Agricultural Wages Board on the agricultural economy and on the wages and conditions of those who work in the sector. I am afraid that I do not agree with his arguments, as I do not see the point of yet another impact assessment for three reasons.
First, average earnings in 2010 for full-time farm workers were 41% above the industry minimums set by the board. More recent data from the Annual Survey of Hours and Earnings, the ASHE, showed that more than 90% of workers employed in agricultural trades received gross pay above the agricultural wages order grade minimums. It is reasonable to conclude that the vast majority of farm workers are paid well above the agricultural wages order minimums already.
Secondly, current contracts will remain the same—that is, 41% above the wages board rates—so we are talking just about new contracts. The latest impact assessment states that if demand remains strong relative to supply, as evidence suggests is likely to be the case, wages are unlikely to be eroded as farmers will need to attract workers. The important point here is that if farmers want to attract workers, they will have to continue to pay at least what the worker might expect from comparable work outside farming, which is several thousand pounds more than the agricultural workers’ rate.
Thirdly, to assist farmers and employers, the National Farmers’ Union has agreed to publish a regular series of comparative indicators to help inform employers undertaking periodic pay reviews. These comparative indicators will take account of factors such as cost-of-living changes, the labour market, comparable industries and farm business conditions. They will also provide an opportunity to focus on regional differences rather than national, one-size-fits-all data, which is in keeping with the flexibility that we need in our industry.
The National Farmers’ Union has agreed to publish regularly all the data that the noble Lord, Lord Whitty, calls for in this amendment. Let us not duplicate the work. I do not see the need for yet another impact assessment.
Baroness Donaghy
My Lords, it is extremely regrettable that the confusion about the failure to move Amendment 3 meant that attention was distracted from the moving of this amendment. I have sympathy for my noble friend Lord Whitty: he nobly stood in quickly but that distracted attention from the seriousness of the subject matter.
The Minister will know that I raised this issue of impact assessments in Committee. We had already had two different impact assessments. I thought that was rather worrying, although we got a bit of an explanation as to why it happened. I want to take this slightly wider than just the issue of the impact assessment. My concern is what happens after the Agricultural Wages Board disappears. I am not as optimistic as the noble Earl, Lord Cathcart, that some paternalistic system handed down by the NFU will be an adequate substitute for an equal system—perhaps a joint industrial system. Wearing my hat as former chair of ACAS, I think it important that there is equality of status between farmers and farm workers when it comes to discussing conditions of service and, more importantly, training. That was one of the things that the Agricultural Wages Board did and, incidentally, that was strongly supported by the NFU. It is regrettable that these issues have not been dealt with.
I am not talking about a standard impact assessment. We all have our doubts sometimes about the reliability of those. I mean sitting down and talking about what the future will be. What can we do as Members of this Parliament to ensure that there is an equality of consideration between those who work in the farm industry and those who own the farms? It is quite wrong in this day and age to stand up and say that we can rely on the representatives of the farm owners to give us the statistics. That is not the age we live in.
Lord Curry of Kirkharle
My Lords, I have huge respect for the noble Lord, Lord Whitty, and I thoroughly enjoyed working with him when he was a Minister in Defra. I admire his tenacity as far as the Agricultural Wages Board is concerned. I do not want to rehearse the arguments we went over when discussing this issue a couple of weeks ago but I will comment on the proposed amendment. I declare an interest as a farmer in Northumberland but I am not a landowner. I also chair the Better Regulation Executive.
I want to deal with the process of the impact assessment. The Regulatory Policy Committee, the RPC, scrutinises all impact assessments as submitted and scrutinised this one. It is required to present the range of possible outcomes as a consequence of a decision such as this—I commented on this during my speech in Committee. It has to look at the worst-case scenario, which is that over time wages fall to the national minimum wage. The point I made in the debate was that that is absolutely unlikely to happen because of the demand there is for agricultural workers. The differential in wages that exists now, as referred to earlier, will continue and may widen because once you remove the Agricultural Wages Board the market will itself respond. In my view, farm employees will then be even better off.
Lord Deben
My Lords, I took part in the earlier discussions. I apologise to the noble Lord, Lord Whitty, for missing the first of his lambent sentences. I am concerned about what he asks for. The noble Baroness wanted it because she felt that somehow or other this would be a patronising view. The National Farmers’ Union is not being patronising; all it will do is produce the figures. There is nothing patronising in that. You cannot have a negotiation to produce the figures. They are the figures, they will be the figures and we shall know what they are. Rather like speeches I have heard from the noble Baroness on this sort of subject before, she talked about a world that, if it ever existed, has long passed.
It is that that concerns me about the proposals of the noble Lord, Lord Whitty. I live in the country and own some land there—not much, but around the house in which I live—and I know the farmers round about. I find it insulting that farmers are the only group of the population that cannot be allowed to run their labour relations within the general context of the national system. As a countryman, I find great annoyance at the way in which urban people talk about farming as if it was so alien to the normal practices of life, so divorced from the normal issues of the marketplace and so unconcerned with the future, comfort and family life of its workers that it needs a special arrangement that no one else needs and that everyone else has shuffled off as being part of a historic circumstance. Yet the farmer has to be left with it and I find that insulting. That is also an indication that the party opposite does not understand the countryside at all, wishing to impress upon it things that have nothing to do with our knowledge in the countryside.
In the countryside today, good farmers are extremely difficult to get hold of. They are significantly better paid than the minima produced by the Agricultural Wages Board. No farmer worth his salt trying to compete in the modern world is unwilling to pay a proper wage to somebody doing what is an increasingly technical and difficult job. The Agricultural Wages Board was set up at a time when there was a wholly different farming structure. I admit that when I was Minister of Agriculture I would have liked to have got rid of the Agricultural Wages Board—even then—but since then the arguments for it have become even less pertinent. Agriculture is not like it was even 20 years ago. It certainly is not like it was when the Agricultural Wages Board was set up. I very much hope that the Minister will refuse to ask for yet another investigation.
To end, the noble Lord, Lord Whitty, very charmingly suggested that he was helping the Government and very charmingly suggested that he was only doing them a favour. I very charmingly suggest that he is actually trying to put this off again. This is another mechanism within the rules of the House to try to revisit this particular subject. Frankly, when the Agricultural Wages Board has gone, nobody will remember that it ever existed because life in farms will continue. We will have rid ourselves of an unnecessary burden, an additional cost and something that is a hangover from the past. Now, I am a great believer in tradition. I love the traditions of this House and am very keen on conventions of that sort but this is a tradition that we can do without. It is not necessary. I hope that my noble friend will not give this any shrift whatever.
The Duke of Montrose
My Lords, I apologise for having missed the first few words spoken by the noble Lord, Lord Whitty, but I know where he was coming from. I cannot fully agree with my noble friend Lord Deben: I think it is actually the other way round. I employ a couple of agricultural workers and know the set-up as it now occurs up north. Of course, that is miles away from the historical situation that we used to have there, whereby agricultural workers had no security whatever. They had what the Scots termed a seeking-on day. If the farmer did not come and see you on your seeking-on day, you knew that you were leaving. That happened every six months.
The Agricultural Wages Board and other things came in and have satisfied that element. It has also covered a great many other things. The complaint on the other side should be that not enough agricultural workers have joined the union because the agricultural workers will be in a strong position when this is introduced. Admittedly, you get the awkward position, if there is a farmer who employs only one employee, that he could terminate his contract and immediately bring in something entirely new.
The Minister gave me a very good answer to my questions, which he was not able to provide in the debate, stating that there will be, on a new contract, no automatic right to special rates of pay, but if you sacked the only worker you had, you would immediately destroy any chance of an amicable way of working in future. Not only that, if you had to renegotiate the contract, the other side could say, “I’m going to get my union representative along, and he will make sure that you comply”. Presumably, the union will also produce its own rates of pay. Of course, we now have these various certificates that you can gain, and from that you can develop a hierarchy of pay. So I should have thought that the fear of loss, while looking obvious initially, will, as the noble Lord, Lord Curry, said, work out the other way round.
Viscount Younger of Leckie
My Lords, the amendment of the noble Lord, Lord Whitty, would require Ministers to publish and lay before both Houses of Parliament an updated impact assessment of the abolition of the Agricultural Wages Board prior to the commencement of the provision to abolish the board. The House has already debated the impact of the abolition of the Agricultural Wages Board at considerable length both in Grand Committee and at Report, and has voted in favour of abolition.
The best estimate of £250 million over 10 years, which includes the potential impact on wages, sick pay and annual leave, is based on empirical academic research, which looked at wage levels in the past.
As I have made clear previously, the impact on wages, which is the largest cost, would account for only 1% of the total agricultural wages bill over the 10-year period. However, the impact assessment makes clear that there is and will remain considerable uncertainty about the impact and that in fact there may be no reduction in workers’ wages or other benefits. That is because the reality of the impact will depend on the behaviour of employers of farm workers and a range of other factors, such as relative strength of supply and demand for agricultural workers and the need to be competitive with other employers in the same area—points made most eloquently by my noble friends Lord Deben and the Duke of Montrose.
Moreover, there are a number of reasons why the impact is likely to be smaller than that suggested by the external research. A majority of workers already receive terms and conditions above the agricultural minimum wage rates, so it is probable that their wages would not be affected if the board were abolished. The underlying market conditions suggest that there will be a sustained demand for agricultural workers. Research indicates that there is a shortage of workers with relevant skills in the agricultural sector, and that that shortage is higher than comparable shortages in other areas of the economy. The agricultural workforce is also ageing, with 55% of the sector workforce aged over 45, which, again, is higher than in other sectors of the economy.
Moreover, agriculture is a huge industry, with tremendous potential for growth to meet the challenges of feeding the world’s growing population. As I said in the debate on Report, £250 million over 10 years assumes that every agricultural worker would see a relative fall in their wages compared with what they would have been due. We think that that is a highly unlikely scenario given the evidence of the demand for workers—a point made most eloquently by the noble Lord, Lord Curry. However, we deliberately decided to adopt a cautious approach in the impact assessment, given that there is some uncertainty.
Lord Whitty
No, my Lords, my assertion was that the Minister clearly did not agree with the independent research.
Viscount Younger of Leckie
My understanding was that the noble Lord was querying the letter that I wrote and I just want to clarify what I said in the letter. I said that,
“it did not take account of other factors which would have an effect on wages … for example, the supply and demand for labour, prevailing economic conditions and so forth”,
which are points that I have already made.
The noble Lord, Lord Whitty, questioned the position regarding Wales, which was also debated at some length in Committee and earlier. We have been clear throughout that we regard agricultural wages as a non-devolved matter tied to employment and wage setting. Wales Office and Defra ministers have had regular discussions with Welsh Ministers on the issue since the abolition was first proposed in July 2010. Those discussions will continue so that the transition from the Agricultural Wages Board is as seamless as possible for workers and farmers in Wales. I hope that, in part, that answers the question raised by the noble Baroness, Lady Donaghy, which concerns the need to look after the interests of farm workers during the transition.
The noble Lord, Lord Whitty, raised the issue of seasonal or migrant workers, who he stated would lose protection with the abolition of the Agricultural Wages Board. I remind him that it is the gangmasters licensing legislation that specifically protects migrant workers from exploitation, not the agricultural wages regime. General employment law provides for a high level of protection for all workers.
The noble Lord raised another issue which has been raised in the past which has no particular relevance to impact assessments. That is the issue of tied cottages. Workers in tied cottages will continue to be protected by the terms of their tenancy agreements and tenancy legislation. The Bill’s provisions will not alter the status of protected tenancies under the Rent (Agriculture) Act 1976.
We therefore do not see what purpose it would serve to publish yet another impact assessment. That point was made by my noble friends Lord Cathcart and Lord Deben. Therefore, I hope that the noble Lord, Lord Whitty, will feel able to withdraw his amendment.
Lord Whitty
My Lords, with due respect to the Minister, it might have been better had a Defra Minister replied to the debate, because some of the information that he has just given is not accurate—for example, on tied cottages and the provisions for migrant workers. The requirements under the agricultural wages order and related matters were set by the board. They are enforced by the gangmasters authority these days if they involve gangmaster labour. I think that the noble Lord needs to get back to Defra to clarify some of those things.
However, let us get to the main point. The noble Lord, Lord Deben, said that he thought that I was pushing the traditions of the House. One of the problems with this is that Ministers collectively have ignored what the House clearly decided in debate on the Public Bodies Bill only in relation to this quango. Whether we agree with its abolition or not, the Government have ignored what was clearly laid down two years ago after, as I said, bitter debate in this House and have not provided the House with adequate information or time to discuss this issue, as they have on all other quangos that they are abolishing, or else there has been a bit of new primary legislation.
That is why there is such a hoo-hah about the assessment; it is not good enough. The Minister has said that he does not agree with it. The assessment itself says that the estimate it contains was the best estimate, not, as the noble Lord, Lord Curry, and the Minister have said, the worst estimate. If we accept that Ministers have signed off on an impact assessment—this was all signed by the Minister—Ministers cannot then come to the House and say that they do not believe a word of it.
We have to start from that point. If the Government had gone through the normal procedure, we would have had a detailed Explanatory Memorandum and it would have gone through the enhanced scrutiny procedure under Section 11 of the Public Bodies Act. Instead, they have tried to cut corners. That is the problem.
That is why I do not apologise for raising the issue again. Yes, we are going over some old ground, but we are also hearing some of the old arguments. Under that procedure, what my noble friend Lady Donaghy has asked for—namely, a monitoring process so that when abolition occurs we can see what actually happens to agricultural wages—is required for other bodies that are being abolished, but it is not required here.
I find it difficult to understand those who argue that after this body disappears, nothing will happen to wages and no one will notice, as the noble Lord, Lord Deben, says. The noble Lord, Lord Curry, says that wages will probably increase. However, the only document that we have had says that although some people’s wages will go up, on average and on aggregate they will fall. That is why we need a better assessment.
This is a very minimal requirement. If we had gone down the route that the House agreed, the Minister would have been subject to far more detailed requirements and debates. He would have had to explain himself far more convincingly than he has today. All I am asking is that before we implement this measure, we get a document from the Government that does what they are required to do for every other body apart from the one that protects some rural workers.
That does not seem to be a position that the House of Lords ought to be taking in the 21st century, and it may be seen that way. Although the noble Lord, Lord Deben, says that no one will notice, there are some people who will. The noble Lord obviously has conversations with the grain barons of East Anglia and maybe they would not notice, but a lot of small farmers have objected to the abolition—in the West Country, the north and Wales—saying that this was a bigger problem. They will notice because they will have to engage in rather difficult negotiations with their one or two staff.
The people who will really notice, though, will be those who are employed relatively casually and seasonally by the element of the agricultural sector that is really pushing for this change—that is, horticulture. The people who will notice are probably not so much those who are paid above the minimum rate but those who are on the lowest wages, at the minimum rate or even below it. Those at the bottom end of the agricultural labour market are going to notice. If the Minister persists in resisting this today, we will not even be able to assess properly whether I or the Government were right. That does not seem to be a sensible position to adopt in the tradition of this House.
Although it is late at night and I do not expect to win it, I think that I need to test the position of the House so that it is quite clear and our Commons colleagues can at least look again at the arguments, because the other way in which we are breaking with tradition is that this measure has come in on Report and the House of Commons has not even had a look at it yet. I will test the opinion of the House, for what that is worth.
Viscount Younger of Leckie
My Lords, I begin by thanking noble Lords for the constructive and positive debates we have had on this clause. Responding to an amendment tabled by my noble friend Lord Clement-Jones on Report, the Government are introducing two further amendments to the clause. These amendments mean that some unpublished films and photographs will remain in copyright until 2039 at the earliest, as they do under the current law.
I acknowledged on Report that films can be commercially exploited without having been published. This is because of the legal definition of the word “published”. The same may be true of some unpublished photographs. Equally, there will be some film material and photographs in commercial archives that have yet to be commercially exploited in any sense. These archives may have built business cases on the basis that that material would remain in copyright until 2039 at the earliest and could be exploited until that point. Therefore, to provide some certainty to those businesses, the Government are exempting film and photographs from the clause.
However, a smaller proportion of unpublished films and unpublished photographs are affected by the 2039 transitional provisions than some think. Many films put on commercial release, including newsreels, will have been registered under film legislation, and the 2039 provisions do not apply to those films because they are regarded as published. With regard to photographs, only unpublished photographs taken between 1957 and 1969, whose author died during that period, are affected by the 2039 provisions. Photographs taken before 1957 were protected for 50 years from the end of the calendar year in which they were taken.
The second amendment means that regulations may provide for different provisions for work of different types and of different ages. This would mean that recent works, for example, could be treated differently from centuries-old works.
I hope that in the light of what I have said noble Lords will support these amendments. I beg to move.
Lord Clement-Jones
My Lords, I thank the Minister. If anything, what he has just said demonstrates the complexity of copyright legislation and the provisions of what is now Clause 78. One of the interesting things about this Bill is that when debating Part 6 we have continuously had to push our horizons forward. I think that when we started it was Clause 57 onwards, then it was Clause 66 onwards and it is now Clause 76 onwards, but we are very flexible and adaptable here. The amendment demonstrates not only the complexity of copyright law but the flexibility and willingness to listen that the Minister has demonstrated throughout our debate on Part 6. I welcome his response to the concerns, particularly of those in the news agencies and of photographers, about the possible impact of Clause 78, and I am delighted by the outcome.
If we were in Committee, we would probably want to probe the exact meaning of Amendment 9 to,
“make different provision for different purposes”.
However, as we are at Third Reading, I think we will let the Minister get away without too much debate on those words. They are quite wide, and the other place or whoever might wish to have a discussion about them.
The Earl of Erroll
My Lords, I add a slight note of dissent. I entirely agree with Amendment 9, which gives greater flexibility to,
“make different provision for different purposes”.
However, Amendment 8 paints the regulation-makers into a corner. I quite see the point of the noble Lord, Lord Clement-Jones, on the commercial stuff. This is his word as a commercial lawyer among the large rights holders and the people who make money out of this material. I see their point. They have invested heavily in some of this stuff, as in other cases, and they want a commercial return on it.
The trouble is with all the other stuff. This is not just about photographs sitting in commercial archives or produced for a commercial purpose. This is not about film sitting in a commercial archive, or from which, published or not, somebody is trying to make some money. It is everything. The sort of stuff that has ended up with genealogical societies around the country and in libraries’ photographic collections will all fall under this. I realise that this does not apply to pre-1957 photographs, so it will not affect people doing research on the Second World War, but you will suddenly have this strange cut-off point. It would have been wise to keep greater flexibility in this so that the Minister, using,
“make different provision for different purposes”,
could have introduced a definition of which kinds of photograph or film were covered. It would not have been difficult to do.
Therefore, Amendment 8 should perhaps be withdrawn because it can be covered in the rest of the provisions, which says that he can then go on to reduce the duration of copyright in existing works. It is made by regulations. If you can do different provisions for different purposes, I would have thought there would be the flexibility to be able to meet the concerns of the noble Lord, Lord Clement-Jones, and the perfectly valid commercial concerns, and also have done things for the libraries, universities, researchers and other people who want to do other things with the works where there was no commercial intent in the first place. Therefore, I would accept Amendment 9 for flexibility, and if I were the Minister, I would withdraw Amendment 8.
Lord Stevenson of Balmacara
My Lords, I echo the initial comments of the noble Lord, Lord Clement-Jones, on this. The Minister has again shown his willingness to listen to some of the concerns that have been expressed on this matter. I welcome the two amendments in this group, although I note the points recently made, which may bear further thought. However, the Government are in the right place on this. It is a question of sticking to where we are and recognising that.
We should also recognise that this has been a complicated journey through these legislative clauses. Copyright is never an easy issue to get into. I am sure that the noble Lord would recognise that; he has always looked a bit punch-drunk when we have had discussions on it but has come up smiling, which is one of his nice characteristics. However, there are a number of difficult and complex issues underneath this. They are not going to be resolved by what is in the Bill, although we have caught up in a number of areas and that is good. This is really about setting up discussions that we will have to have in this House and another place as the various changes that are being provoked by the Hargreaves report are brought forward as what are in generic terms called “copyright exceptions”. They of course deal with a large number of issues that could have been, as we have argued, contained in this Bill but have been left deliberately to secondary legislation. That is not to say that we will necessarily agree with everything that we see when that comes through. There have to be a lot of complicated discussions on some of these points. We welcome the opportunity to have those, based on where we are now. On that basis, I am happy to agree with these amendments.
Viscount Younger of Leckie
My Lords, I will make a few brief comments. I thank those who have contributed to this short debate: the noble Lord, Lord Stevenson, the noble Earl, Lord Erroll, and my noble friend Lord Clement-Jones. I am pleased that the amendments have been accepted, in general, in the spirit in which they were intended. To take up the comments of the noble Lord, Lord Stevenson, it is true that copyright is a complex issue. There are polarised views from both sides. We all recognise that.
I listened intently to the comments of the noble Earl, Lord Erroll. It would be good if I wrote extensively to him concerning the point of extending the provisions beyond normal photographs, to put it crudely. The noble Earl asked whether photographers’ concerns could be addressed regarding Amendment 9. A relatively small number of photographs are covered by the 2039 provisions: as he may know, it is only those taken between 1957 and 1969. Those who want to use those photographs could seek a licence or use orphan work for business. However, I will follow this with a more thorough response to the noble Earl.
“() make different provision for different purpose;”
Lord Howarth of Newport
“(7) The Secretary of State shall lay before Parliament, not more than three years after the coming into effect of regulations under this section, a review of the progress of licensing of orphan works, including an impact statement and a cost/benefit analysis.”
Lord Howarth of Newport
My Lords, Amendments 10 and 11 in this group are intended to help refine the orphan works licensing scheme which the Government are rightly bringing in, to make it more fit for purpose.
I say at the outset, as much for the ears of officials as for noble Lords, that these amendments have been tabled entirely at my own instance. Those in various parts of the cultural sector with whom I have conferred on the whole question of orphan works over the weeks in which we have been examining this legislation would, I think, have preferred that I should not trouble your Lordships any further on these matters, trusting—as they wish to be able to do—that reason will prevail in the processes in Whitehall leading up to the regulations. However, I have thought it right to prevail for a few moments on the patience of your Lordships. This House is always a forum in which it is appropriate for us to consider policy decisions which, unintentionally of course, may damage the cultural life of this country. There are also principles here which, as parliamentarians, we ought to consider.
The term “orphan works”, as we know, denotes material such as books, letters, diaries, documentation from the voluntary sector, broadcasts and newspapers held in our great public collections which may still be in copyright but where the owners of the copyright cannot be identified—or, if they have been identified, cannot be found. Vast quantities of such orphan works are held in our public collections. They would be capable of expressing and illuminating our shared national heritage. They represent a resource of enormous potential value educationally, academically, culturally and economically. Without a well designed orphan works licensing system, it will remain impossible, as it is at the moment, to digitise this material and make it available to citizens and scholars for the public benefit.
All are agreed on two things. We need a workable orphan works licensing scheme that will make this material accessible; and, contrary to suggestions made by some campaigners, rights-holders ought to be paid for the use of their intellectual property, whether they are identified in the process of digital search or appear subsequently, if they request that they should be paid—although we anticipate that nearly all of them will not make the request. There is no question of anybody proposing to steal other people’s intellectual property. If an organisation wanted to do that, of course it should not be licensed. I certainly do not believe that our national cultural institutions wish to do any such thing.
Your Lordships made the decision, on Report, on a narrow majority, that it would be inappropriate to introduce a provision to provide for flexibility in respect of the requirement that fees should be paid up front for the licensing of orphan works. However, I must say to noble Lords that libraries, archives, museums, galleries and universities remain seriously worried about the decision that the House took last week. Of course, I accept that it was the will of the House, but these amendments seek to address entirely reasonable anxieties about elements within the architecture of the Bill as the House has approved it. Nothing in my amendments would undo the principle of the legislation.
I also suggest to your Lordships that these are not political issues. When we have legislated on copyright over the years we have never done so in a partisan spirit. Some noble Lords may have taken part in the parliamentary proceedings on the Copyright, Designs and Patents Act 1988. I well remember that John Butcher, the Minister responsible for that legislation, conducted the parliamentary proceedings in the spirit of a seminar. I was the government Whip on the Bill. We do not normally conduct legislative proceedings in the spirit of a seminar, but we were seeking to elicit from everybody who participated in those proceedings the best contributions they could make towards achieving an appropriate balance and a policy that would protect the legitimate rights of individuals and corporate interests, while providing for the maximum public benefit. We debated in the same spirit the proposals on copyright much more recently during the passage of the Digital Economy Act 2010. Those debates were strenuous but fair-minded. We should continue, even at this very late stage of the Bill, to legislate in the same spirit.
Amendment 10 would provide that, after not more than three years, there should be a review of the progress of the orphan works licensing scheme. The review should include an impact assessment and a cost-benefit analysis. If we have such a review we will be in a position to know whether the anxieties that are now being expressed will have proved justified. The anxieties are principally about the model of diligent search that may be required, particularly if it is to be insisted that there should be a diligent search for each individual item for which a licence is sought, rather than a diligent search on a rigorous but more generic model.
There is a concern that this requirement and the requirement to lodge payments for the vast number of orphan works that we hope to digitise en masse would be burdensome. In particular, there is a fear that this would be an expensive additional cost, on top of the costs that must already be incurred in the process of digitisation. Universities UK, the Wellcome Trust and the British Library have all said, as the House knows, that if up-front payments are required, they anticipate that they will not, after all, feel it possible to embark on large-scale digitisation projects. If that proves to be the case, the Government’s very laudable policy will have bitten the dust.
If we have the review, it will enable us to know whether those who are now expressing those anxieties are right, and whether we, as parliamentarians, may have made a wrong decision. The material in the review —the impact assessment and cost-benefit analysis—would, of course, be extremely valuable in enabling Parliament to undertake post-legislative scrutiny, which is something that many of your Lordships feel is appropriate to be carried out by this House, and of which we should do more.
Amendment 11 would provide that after five years, royalties that had been paid up front to the licensing authority but remained unclaimed by rights-holders should be returned to the institutions that had deposited the funds with the licensing authority. On Report, the Minister briefly discussed the question of what might happen to these funds in due course. He indicated that it is not the intention that the funds should remain indefinitely in the escrow account of the licensing authority for the eventuality that rights holders would turn up, but that after a period, which I understand to be five years:
“Unclaimed fees could be used to subsidise the cost of running the orphan works scheme”.
The Minister must be intending to bring in a mighty expensive quango, because there will be quite substantial funds in the account. Otherwise, he contemplated, the unclaimed fees could be used,
“to pay for preservation costs in public institutions or industry training. There will be further consideration of these options”.—[Official Report, 11/3/13; col. 49.]
Will the Minister explain why BIS should determine how these sums should be spent? The great cultural institutions, such as the national museums and galleries, and the British Library, are funded not by his department but by DCMS, which very rightly operates on an arm’s-length principle. It does not believe in telling these institutions how they should use their funds. This is, therefore, a question of principle. However, the most important principle is that these funds should not revert to the Exchequer. The Minister did not discuss that possibility. Although I raised it in my speech on Report, he did not refer to it in his wind-up. Of course, it was quite explicitly contemplated in the impact assessment last year.
If that were to be the case—if, after five years or after whatever interval, the money, instead of going back to the institutions that had deposited it, reverted to the Exchequer—that would, in effect, be double taxation. It would be a tax on funds that had already been provided by the taxpayer by way of grant, and otherwise it would be a levy on charitable funding, whether that is funding raised charitably by public institutions or by great charitable institutions such as the Wellcome Trust.
These institutions are—I repeat, and again emphasise —happy to pay rights-holders when they are found, and would of course remain happy to pay those rights holders even after the money had been returned to them by the licensing authority. They are happy to contribute to the reasonable administrative costs of the licensing authority. They are not happy to forfeit precious funds notionally for the benefit of rights-holders but in reality for the benefit of the Exchequer. I cannot imagine any justification for that.
To speak of competition in this particular context is, in any case, meaningless. Publically-funded institutions that are not for profit, but that hold collections and provide services for the public benefit, have different obligations and accountabilities, and face different costs from private institutions, operating for profit in the marketplace. You cannot reasonably make a comparison or invoke the principle of competition here.
If the Government were to confiscate funds that had been derived from public and charitable institutions we would be cutting off our nose to spite our face. I hope that the Minister will, in his response, definitively rule out any such intention on the part of the Government. I beg to move.
Lord Clement-Jones
My Lords, I am not unsympathetic to the first of the noble Lord’s amendments, Amendment 10, but on the argument that he makes for a review of the orphan works scheme—and many of us have doubts about how that is going to operate in practice—I wonder whether it could not be done more frequently in the Intellectual Property Office’s annual report. The Minister demonstrated in the course of our debates on the Bill that it will be flexible enough to cover a number of areas. If licensing in the form of a digital hub and perhaps ECL can be covered, or meta-data, why not the state of orphan works?
In passing, perhaps I could raise another matter relating to orphan works. In the debate on Report, my noble friend the Minister said:
“In relation to Amendment 84AE, my noble friend Lord Clement-Jones was concerned that there might be a loophole regarding sublicensing. The answer to this is that the Bill does not permit sublicensing, if that is a help to my noble friend”.—[Official Report, 11/3/13; col. 33.]
I believe that the advice the Minister has received may not be correct in that respect. As the Bill currently stands, it seems expressly to contemplate sublicensing. New Section 116A(4) states:
“The regulations may provide for the granting of licences to do, or authorise the doing of, any act restricted by copyright that would otherwise require the consent of the missing owner”.
An act of authorising another to do the relevant act would clearly permit sublicensing.
Because of the timing of the Third Reading, I was caught on the hop and have been unable to put down a probing amendment on this, but I would be very grateful if the Minister could examine the issue and give an assurance now, or subsequently in correspondence, that the regulations will not permit this.
The Earl of Clancarty
My Lords, briefly, I support Amendment 10, proposed by the noble Lord, Lord Howarth, although I support Amendment 11 as well.
To emphasise how important it is that the new orphan works scheme works and how culturally significant that is for Britain, I agree with everything that the noble Lord said. It is impossible to overestimate the importance of this development for our national museums. For instance, being able to show orphan works—there being such a huge number, indeed millions, of records, papers, photographs and artefacts, some over 1,000 years old—may well make a difference to the quality of display and exhibitions and increase the viability of our collections for international scholarship.
As an artist and creator myself, I might have been expected to vote against Amendment 84AG, which the noble Lord, Lord Howarth, tabled on Report, to allow flexibility in the up-front payment of fees to creators. I did not do so, and I think that I speak for other artists and creators who in this instance can see beyond the minimal benefits to them, if indeed they exist at all, from this aspect of the Bill in the direction of the far more significant wider picture of displaying work, which is often one of the major aims of artists and creators in the first place.
It would be a great shame if, because of this component of the Bill or for any other reason, the orphan works scheme failed or did not operate properly, having come this far. We may find out fairly quickly if this is the case, so three years will be ample time. Given how significant the enabling of orphan works to be shown will be in deepening a sense of British and world culture within our own institutions, we should be able to review the situation at the very least. I support the noble Lord’s amendment.
Baroness Brinton
My Lords, I thank the noble Lord, Lord Howarth of Newport, for these two amendments, which are very helpful in trying to balance and find a bridge between the two very distinct sides of the argument that we have seen during the various stages of this Bill—and, in particular, the problems already outlined about whether arrangements for orphan works will work. I am grateful, too, to my noble friend Lord Clement-Jones, for saying that Amendment 10 might be helpful to all parties. I hope that the Minister can give us some encouragement on that.
On Amendment 11, I wanted to point out that I am as concerned as the noble Lord about a large amount of licence fees sitting in a large black hole and then returning to the Government in whatever form as a double taxation. My only question—I apologise as it is rather a technical one, but I saw the amendment only earlier today—is about the five years of royalty payments. If it goes into bona vacantia, how long does it have to sit there before it is released into general Treasury funds? Is it another blocking account? I recognise that the proposal refers to “bona vacantia or otherwise”, and that “otherwise” might refer to the general coffers of the Treasury. It would be helpful to know. My only suggestion to the noble Lord, Lord Howarth, is that five years might be too short a period to search for authors of orphan works.
The Earl of Erroll
My Lords, I support both amendments, which were spoken to most ably by the noble Lord, Lord Howarth of Newport. The noble Earl, Lord Clancarty, also made comments that were absolutely right on the nail.
A review is only sensible. An awful lot of the figures should be obtainable from the licensing authorities, whoever is going to be appointed, on the financial stuff, how much is done, and so on. I do not imagine that it will require a huge amount of public money to try to do a review at whatever period is thought best.
As a taxpayer, I am concerned about the up-front fees. The noble Lord, Lord Howarth, almost did not stress that point enough. The notion is that those fees should be set at a rate that means that orphan works do not undercut stuff that might be in a commercial library of works that people can license. They would probably not be on the same subject in most cases; they would be for different purposes. If one of the big national libraries or a university was trying to prepare a work of academic interest, they would not rush around paying fortunes to these libraries that have collections of pictures or text. They cannot do that; they will not have the budget for it. If someone was to look at what this stuff was currently sold for, or licensed for, we could be talking about a huge sum of money going into the bodies collecting for orphan works. We are not talking about a petty million, or something like that.
A department always expands to spend the money provided, so if it is going to be ploughed into trying to collect these things will get enormous and complex, and they will spend money like water. On the subject of BIS sponsoring training programmes, well, we know what happens with most government training programmes, so just to get the point across and to see the horror on the Minister’s face, I volunteer to be either one of the societies collecting the money so that I can have a huge scheme, or one of the chief accredited training agencies, because this will be a licence to print money.
The point is well made by the noble Lord, Lord Howarth. The funding of universities and libraries and institutions like that, which this provision is aimed at, comes out of public or charitable funds, and it is there for a purpose. The concept that this is a hidden tax that then goes back to the Exchequer or to fund a nice quango or whatever is totally unethical. I cannot put that strongly enough. If the public woke up to the fact that that was happening, they would be absolutely horrified, so the Minister would be incredibly well advised to accept this amendment to protect the Government from all sorts of accusations in future—unless, of course, they do not expect to be in power by the time this happens and think that another Government will take the flack. However, given that most politicians think they will still be in power, if I were them I would protect myself.
Lord Stevenson of Balmacara
My Lords, my noble friend Lord Howarth, when introducing this amendment, mentioned that in Parliament as a whole there was a genuine sense that issues to do with copyright were dealt with in a non-partisan way, and he explained some of the background to the CDP Act 1988 and to the Digital Economy Act. This debate has shown that the spirit lives on. I stress that I do not think that this is a partisan issue; we are all very interested in this new and broadly welcome provision, which anticipates the EU directive and perhaps gold-plates it a little. However, there is no doubt that we need an orphan works scheme. It is right that it should be introduced and we are backing it all the way. Within that it is absolutely clear that rights holders must be remunerated if they wish. However, as many of them will not be easy to find, a diligent search of a high standard must be carried out. I recognise that the way to prove all that is to create this escrow account approach, and that that should be done for a reasonable period. However, the more one listens to the points that are made round here, the more one feels that this is going in the wrong direction in this respect. As virtually all speakers have said, surely it cannot be in the best interests of the Government to tax the institutions that are expected to carry out this work and mainly benefit from it. That cannot be right. The Minister was reported in Hansard as saying that if the escrow funds were building up and not being used, they could be used to defray the costs of running the licensing body, to pay for preservation costs and for training. However, that escrow funding is the money that would be paid to rights holders, so it does not really belong to the licensing body to do with it as suggested.
We are at the fringe of moving in the wrong direction here. It would be sensible if the Government were to pause and think about this again. This is a good scheme and is the right thing to do, but perhaps there is a way in which one can retain the funds that are going to be held for potential rights holders within the original institutions. At least then they would have the benefit of the money even if they could not allocate it, and the sensibility that this somehow was a taxation scheme would be avoided because it would not work. It would be the worst of all possible worlds if, at the end of this process of trying to get these proposals scheduled and incorporated in legislation, the whole scheme was stillborn because people could not see how it could be financed. I very much want to hear what the Minister has to say on this matter. Some movement towards the position of the noble Lord, Lord Howarth, would be much appreciated.
Viscount Younger of Leckie
My Lords, I thank the noble Lord, Lord Howarth, for his amendments. They raise important issues and I trust that I can provide some satisfactory assurances. I say at the outset that I very much welcome his support for an orphan works scheme and, indeed, for the principle that creators should be paid. He recognises that there is a balanced approach to this issue in this respect.
Regarding Amendment 10, the Government agree that there will need to be a full and proper evaluation of the effectiveness of the orphan works scheme, and its impact on users and rights holders. That is why the Government have committed to a review of the functioning of the scheme one year after it is fully functional. This post-implementation review would be undertaken by the orphan works authorising body and would include, for example, data on the number of orphan works registrations, and permissions issued by the authorising body. The scope of any review, as determined by discussions with stakeholders, would be incorporated into the authorising body’s regulations. I assure the House that the outcome of the review will be reported to Parliament.
Separately, the Government have committed to another impact assessment of the orphan works scheme in April 2015: that is, one year after the scheme is fully operational. According to government guidance, the first review of regulations,
“should in most cases be carried out and published no later than five years after the relevant regulation comes into force”.
In undertaking to do a post-implementation review after one year, with accompanying impact assessment, the Government’s plans will be fully consistent with these principles and guidance.
Amendment 11 would require regulations to make provision that unclaimed fees paid for the use of orphan works were returned to the licensee within a five-year period. Under the proposals currently in the Bill, in the event that fees remain unclaimed for the licensed use of an orphan work, a variety of options are possible: for example, unclaimed fees could be used to help creators; subsidise the cost of running the orphan works scheme—I believe that that point was raised by the noble Lord, Lord Howarth—pay for preservation costs in public institutions; or pay for industry training. I know that there are wide-ranging views on the appropriate use of unclaimed fees. This is why the wording in the Bill is permissive; it requires regulations to deal with this issue but does not rule any particular option in or out. It does not rule out the return of the fee to the licensee. The current wording allows for further consideration of all these options, with the input of all relevant stakeholders.
The noble Lord, Lord Howarth, supported by the noble Earl, Lord Erroll, raised the issue of the money going to the Exchequer. The use of the funds will be the subject of a full consideration. I hope that gives some reassurance to noble Lords. In other words, all options are open and there will be no presumption that the money will go to the Treasury under this scheme. I hope that that also reassures the noble Baroness, Lady Brinton. The noble Baroness raised a related matter concerning how long the money would sit in bona vacantia. As a general principle, money falling into bona vacantia is dealt with by the Treasury Solicitor, and there is no time period as such. I do not know whether that helps. I hope the House will agree that this is the right way forward. I again assure the noble Lord that it is the Government’s intention that the licence fee for the use of an orphan work should be proportionate to the type of use. However, particularly where orphan works are used commercially, the Government believe it is vital that the conditions of use do not inadvertently undermine the market for known works, particularly, for example, where we are concerned with the livelihoods of creators such as photographers.
The noble Lord, Lord Howarth—
Lord Stevenson of Balmacara
I am sorry to interrupt the noble Viscount but this is a crucial point. Will he go back over what he said as I was slightly confused by the wording? Is he saying that before any decision is taken about how the money held in the escrow account is to be utilised if no claims are taken up in the five-year period—that money is held against potential claims—there will be full consultation about that? He used the word “consideration”. If he could confirm that it is a consultation process and that all options are on the table for that, we would be very reassured.
Viscount Younger of Leckie
The word I used was “consideration” rather than “consultation” but there is a fine line between the two. I must stick with “consideration” but I think the best thing to do is to define precisely what is meant by “consideration”. My understanding—I give this commitment today—is that “consideration” does indeed mean consultation. However, I would like to follow up with yet another letter to confirm that.
On Report, the noble Lord, Lord Howarth, concluded that a search would be required for each and every rights holder. The orphan works scheme never intended to promise mass digitisation without a prior diligent search. If we wanted to do this, we would have to find another means of achieving it as the scheme we are now considering could not do so. That might be achieved using ECL, but that depends on the existence of the relevant collecting societies. Those are all questions that we cannot answer at this point.
My noble friend Lord Clement-Jones asked whether there could be a review of orphan works produced as part of an annual report. This seems to be a sensible suggestion. I will certainly consider this idea, along with my officials. He also asked about sublicensing and whether it would be permitted. Every act will require a licence. If someone wishes to use an orphan work—for example, in a television documentary—the licence will need to cover all the issues envisaged. The licensing body will not be able to delegate its powers to license to another person. The provision for orphan work licensing will be construed restrictively by the courts.
On this basis, I hope that the noble Lord, Lord Howarth, feels able to withdraw his amendment. As he considers his reply, and before I conclude, as this is the last group of amendments, I would like to take this opportunity to thank all noble Lords who have participated in our many and varied debates on the important issues covered by the Bill during its passage through this House. As ever, they have brought considerable experience to our debates. In particular, the noble Lord, Lord Stevenson, has led the opposition Front Bench in an insightful and wise way and has rightly subjected the detail to a constructive challenge. We sing in harmony in the Parliament choir—he is more harmonised than me—and we have managed to find a pretty good degree of harmony on this Bill.
It is certainly the case that the Bill is better for the scrutiny that it has received in this House. I should like to place on record my thanks in particular to my noble friend Lady Stowell for her able support on the equalities provisions. I thank the House officials, the Hansard writers and especially the Bill team and all officials who have been deeply involved in supporting me so ably.
Lord Stevenson of Balmacara
My Lords, it would be wrong of me to let the noble Viscount’s concluding remarks pass, particularly as I was named. I also thank him for his considerable work on the Bill, his courtesy during debate, and his incredible letter-writing abilities. I have never been in receipt of so many letters, both by e-mail and by hand. Sometimes people actually checked up whether a letter had arrived that I had not even received. It was helpful to know that it was on its way. We even received three further letters overnight in anticipation of this debate. It shows the quality of the service that we received. I am sure that the noble Viscount will accept that that was not entirely his work.
I also thank the Bill team, although not all of them are present. I hope that my words will go back to those who are not here. The team has been extremely helpful in giving us information and facilitating meetings. I also thank my Front Bench team, the noble Baronesses, Lady Worthington, Lady Hayter and Lady Thornton, and the noble Lords, Lord Young, Lord Whitty and Lord McKenzie, who, along with our legislative support team, have taken much of the load off my shoulders and done a brilliant job in scrutinising the legislation. It has been four months—a considerable amount of one’s time—since we began consideration of the Bill. That explains why the choir has been bereft of our support during that time.
The Bill runs to 266 pages, which, as the noble Lord, Lord Clement-Jones, reminded us, is a bit more than when it was first published. That represents a fair number of trees. This was never going to be an easy job. It is also important to put on record that the Bill did not come to us sanctified by work in another place. A lot of changes were added just as the Bill left the House of Commons, and the Government have added a number of measures while we have been considering it. There will presumably be further consideration in another place on matters such as health and safety, abolition of the Agricultural Wages Board and Midata, which were never discussed in the House of Commons. I should be interested to see what happens when the Bill comes back after Easter.
As the Minister said, the Bill is in a better shape from its time here. It was amended and concessions were offered on 27 major points, which is pretty good. I do not claim credit for them all but in the spirit of bipartisanship, I think we can agree that in most cases the changes were of benefit. There are one or two matters on which we divided, but I am sure that the Government will want to reflect carefully on whether they wish to change the will of the House, which was expressed in many cases narrowly, but nevertheless firmly. I hope that those matters will weigh heavily on the Government.
It has been a most enjoyable time, made better by the good responses that we have received, and I hope that the Bill will fulfil its purposes, even though in some areas it never quite lived up to its name.
Lord Howarth of Newport
My Lords, the last bars of the music are dying away, the curtain is falling, moving valedictory statements have been made but, unfortunately, I have again to be the grit in the oyster because I need to respond to the debate, and the House may wish to know my intention in respect of these amendments.
I thank all noble Lords who have participated in a genuinely helpful debate. I was particularly pleased that the indefatigable noble Lord, Lord Clement-Jones, with whom I have had some degree of disagreement, was willing to support the proposition in the amendment that there should be a review. The noble Earl, Lord Clancarty, supported it, as did the noble Baroness, Lady Brinton, the noble Earl, Lord Erroll, and my noble friend Lord Stevenson. I am grateful to them all.
I am grateful to the noble Earl, Lord Clancarty, for speaking as an artist, because his perspective was valuable. If he, as an artist, has been willing to see another side of the argument on orphan works that is in the public interest, it is particularly telling. The noble Earl, Lord Erroll, spoke as a taxpayer. We cannot all be artists but we all have to be taxpayers. He was absolutely right in what he said about the inappropriateness of setting the tariffs by reference to market values. It is wrong to introduce market values in every area of public life and I wish we could get away from that in our modern political culture. The noble Earl was extremely forthright in his characterisation of the ethics of the Government’s proposition.
However, I was grateful to the noble Viscount, who spoke thoughtfully and constructively, and I very much appreciate the spirit of his response. He acknowledged that there needs to be review. He asked us to be content with the prospect that there will be a review after only one year by the orphan works authority. There is a question as to whether it is appropriate for the body to review itself. Of course it should always do so, but is that sufficient? I hope that whatever Government there is after 2015 will look again at the methodology for monitoring the progress of the orphan works licensing scheme and ensuring that it is fit for purpose and not producing unintended, unfortunate consequences. We all want it to succeed, and if it is not going to succeed we will need to take further legislative steps to get it right.
It would be helpful to have the second impact assessment that the Minister promised for 2015, but we will need subsequent impact assessments. They need to be proper assessments, not ones whereby you just press a button and the computer produces. Whitehall is getting adept at producing impact assessments. They need to be of high quality.
The noble Lord, Lord Clement-Jones, rightly suggested that the progress of the orphan works licensing scheme would be an appropriate topic to be in the annual report of the Intellectual Property Office. That is so, but a whole range of matters will need to be covered in that annual report and there will from time to time be the necessity for a document that is more particularly focused on the orphan works scheme, unless we can all be confident that it really is working according to our best hopes.
On Amendment 11, the noble Viscount again gave me some grounds for encouragement in his emphasis that a variety of options is possible. He did not explain why the Government do not simply accept that the money ought to be returned after a reasonable interval to those who have lodged it because no rights holders have come forward. Even if they subsequently come forward, of course, they will be paid by the licenced bodies. He did not explain why we do not simply and straightforwardly return the money after a reasonable interval. However, he does not rule it out and he promises full consideration, as well as promising to write to us to clarify what that full consideration may mean, and I am appreciative of that.
The Minister has, as my noble friend Lord Stevenson said, been a most abundant and generous letter writer. However, before he lays down his pen, it would also be helpful if he could bring himself to write one further epistle to us about what diligent search and extended collective licensing the Government envisage at this stage. I recognise that there is more work to be done by the working group, but he will know that probably the greatest anxiety of the cultural institutions, even greater than their anxiety about the requirement for up-front payments, is that the regulations may land them with an impossible task in terms of diligent search. It seemed to me that the Minister made helpful remarks on this subject on Report, but if he were willing to elaborate a little and clarify in another letter to us what he intended when he made those observations on Report, we would be particularly appreciative.
In view of the constructive and helpful tenor of the Minister’s response, I beg leave to withdraw the amendment.
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